If you have a responsibility to pay child support and fall behind on your payments it may not only be your paychecks that become susceptible to being dinged for paying back your child support arrearages. Rather, your retirement benefits may be tapped for back child support. Qualified domestic relations orders (QDROs) are a method that many courts are starting to use to get back child support in the hands of parents who need money. Let’s walk you through what these methods look like in Texas and what you need to do to position yourself to make sure that you never fall into a situation where you are liable for paying back child support in this manner.
Let’s say that you had fallen behind in child support or you are a parent who has not been paid child support in some time by a co-parent. In that case, it is reasonable to want to get the child support paid back to you as quickly as possible. Many people rely on payments of child support to help pay their bills like rent, the mortgage, or health insurance costs. Not having that child support money each money doesn't mean not being able to go on a trip or pay down debt. Rather, for many Texas families not receiving child support each month can mean that you are going to be unable to pay for something essential for you and your family.
This situation becomes worse the more children you have. If you have one child, then it is bad enough to not receive child support. However, if you have more than one child then the burden of not receiving child support can become unfathomable. Compound your not receiving child support over a short period with many years of not receiving child support and you have a situation on your hands where you are going to have to do something about this sooner rather than later. When you must include child support into your budget each month and you do not receive payments it is like going to a job and not being paid for the work that you do over many years. Any person in this position would get upset and seek out answers as to why they have not been paid recently. After a while, you would simply choose to no longer work for the employer who is unable or unwilling to pay you for your labor.
Needing to go back to court and ask a judge to enforce a child support order that has left you in a hole for $50,000 is not a simple thing to do. You will have to spend some money to get an order that is supposed to enforce a former order that should have paid you the money in the first place. Not exactly an ideal position to be in. However, it is what it is and you don’t have much in the way of options at this point in the game. Your co-parent may even temporarily get back on track with paying your child support which would prevent you from holding him in contempt of court. That would keep him out of jail and prevent you from using one of the most effective tools in your toolbox as far as motivators to pay you the support that you are supposed to be receiving.
You can and should contact an attorney at this point to help you handle the issue of your co-parent falling so far behind in child support. What options do you have other than to try and haul his backside to court to determine whether he can pay you the child support that you need? Not many. Normally I would recommend that you try and communicate directly with him about the missed payments, but multiple years of missed payments mean that you are past the time of having a conversation. There is no negotiating over an arrearage this large. It would not make sense for you to negotiate with your ex-spouse on this. Even if you could work out a tentative agreement with him you would still need to trust that he is going to do what he says that will do. That is going to be a bridge too far for many people to go down.
What an attorney in 2023 may ask you is whether your spouse has a 401(K) or another type of retirement plan that is known as a defined benefits plan. A defined contribution plan is one where you can contribute a specific amount of money into the plan This is opposed to a defined benefit plan which pays out a defined benefit every so often such as a pension. When you tell an attorney that your ex-spouse does have a plan like this and it is solvent then this is a game changer for you and your children.
As soon as a person who owes child support finds you that you have an order in place that allows you to collect back child support from him then you need to be careful about how you proceed next. It would not be the first time that the person would immediately drain their retirement account and hide the money that is taken out or spend it. This is despite the taxes and penalties associated with taking out money from an IRA or 401(K) before age 59.5. This means that you will likely only have one opportunity at getting the money in that retirement account attached to the judgment and into your hands. Otherwise, if you delay there you will almost certainly find that the money that you thought you were getting in the judgment has been spent or hidden.
Your co-parent may also have a pension plan from a government employer. These types of plans used to be much more prevalent but are less so now. Usually, pension plans cannot be tapped for purposes of paying back child support. However, you should consult with your attorney to determine how you can move forward in this regard. It may be that you can draft a QDRO to get the money in the pension.
Using QDRO funds to pay for a new house after the divorce
Many people who are coming out of a divorce may have questions or concerns about their ability to find a new place to live. You may have spent an extended period living in a family home with your spouse. Now that you are getting divorced you are quickly finding that you are going to have to adjust your lifestyle to living in a rented home or apartment. This is not the end of the world by any means, but it will require a transition of some sort for you and your family. In that case, you should consider what possibilities may exist as far as tapping into a QDRO to pay for a new home. With money being tight after a divorce you may not have the cash on hand that you would ordinarily need to buy a new home. However, a QDRO may offer you a lifeline as far as paying for a new place to live that is yours rather than a place that you will be renting.
Dividing up assets in a divorce is common and that asset division does not necessarily mean that your retirement will be divided, as well. A QDRO is used to divide up the assets that are found in different types of retirement plans. There are likely to be tax consequences for using retirement money to purchase a house. You can use QDRO funds to purchase a home but there are details that you need to be comfortable with before you take the plunge into that water. Using the money from a QDRO to buy a house is ok if you are under the age of 59.5 at least from the standpoint of having to suffer a penalty for withdrawing the money. You should consider taking the money right out of the assets themselves rather than rolling over the assets into an IRA.
The assets in a QDRO are separate from the other assets contained in your community estate that will be divided in your divorce. Do not assume that everything will roll into one neat pile at the end of your divorce. Failing to think through your options and making bad decisions about how you potentially withdraw the money can result in penalties and taxes that can end up costing you a great deal of money. This is money that otherwise could have been spent on something practical so do not assume that you will know what sort of decision is best before learning as much as you can about this subject matter.
More on child support and QDROs
A qualified domestic relations order is a type of court order which requires that a portion of your ex-spouse’s retirement be assigned to you after a divorce case. A QDRO can also be assigned to your child to collect child support that is past due. Child support is usually not taxable income to the person who receives it. However, many retirement plans will tax you if you are the recipient of money distributed under a qualified domestic relations order. This is true even if that money is being distributed to you to pay you back for a child support arrearage. In many cases, it would be your co-parent who ends up being liable for the taxes if your child is named as a payee on the QDRO. Usually, a plan administrator for the retirement plan will withhold 20% of the amount that is paid for taxes. Depending on your specific circumstances you may need to contact the plan provider to have more taxes withheld if that is your choice.
You can also speak with your attorney about including language in the qualified domestic relations order which allows for child support payments to come directly out of that retirement plan. This may be preferable for those of you who have a substantial amount of retirement benefits already saved. It is no wonder why people view their retirement savings as the potential method to keep their cash flow positive after an expensive event like a divorce. While you walk through your options with your attorney you should consider if this is the best option for all parties involved. It would not be the first time for a person to be surprised at the result of their case when it comes to a retirement plan and a qualified domestic relations order. There are many details about these plans that are oftentimes overlooked in a divorce. Working with an experienced family law attorney can be a great way for you to avoid the surprise and hassle that are oftentimes associated with these accounts.
What to do if you fall behind in paying child support
in the final portion of today's blog post, we are going to address the question of what you can do if you find yourself falling behind in child support payments on a habitual basis. For starters, it is understandable to be in a position where you have not paid child support for an extended period. There are many valid reasons why you could fall behind in child support. Many times, if you address the issue and be as proactive as you can be with your co-parent you can avoid the worst of an additional child support case such as enforcement. This should be a lesson to you that the more you communicate with your co-parent about these issues the better off you will be. If you attempt to hide these types of issues from your co-parent you may run into a situation where you have another family law case staring you down when that was not necessary.
The first thing you should do is be willing to discuss with your co-parent any potential issues with child support that you see coming up. While not every person can perfectly anticipate the future when it comes to child support there are some situations that you can see coming. For example, if you are working a temporary job and know that your current contract is coming to an end then you can and should share that with your co-parent. Hopefully, you have been able to save up extra money to pay child support while you are looking for a new job. However, if you have not been able to do this then you should talk to your co-parent about it as soon as you can. The two of you may be able to work out a plan where you pay some of your children's support back over a period. This is a much better idea than hiding the fact that you have no income coming in.
The next thing that you can do when you fall behind in paying child support is to pay as much of the money as you can. Not paying any money during the month is a bad idea. You will fall even more behind when you do not pay anything in child support. Rather, you should make every effort to pay as much as you can in child support each month. This is beginning with notifying your co-parent about any difficulties that you may be experiencing when it comes to paying child support each month. There is nothing wrong with running into circumstances that could not be avoided. However, that does not mean you do not have to take responsibility for moving forward or that you do not have to make alternate plans for paying child support.
If you have lost your job or seen your hours reduced significantly then one thing you can do is try to find work as quickly as possible. Even if this is not a job where you see yourself on a long-term basis it is better to find some work that pays you some sort of wage than to sit and wait for a better-paying job. You should take every opportunity that you can find for now and then work on finding a more long-term job when you have begun to make progress on the child support arrearage. If you start to fall behind even further, it may be time to contact the court to set yourself up for a modification case. You can request to have your child support reduced if you have found yourself in a position where you have lost an extensive amount of your income-earning ability due to a disability or for another reason. However, the last thing you should do is sit around and hope that the situation takes care of itself. It certainly will not, and you need to be as proactive as you can be about handling the situation with the income at your disposal.
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