With SERIOUS apologies because it’s largely personal…I hope. It pertains to my daughter’s divorce…which is still ongoing and getting exponentially more acrimonious with every passing week.
The question is: is there a deadline in any given tax year when someone who’s age 47 and has made a whopping withdrawal from a 401k can return the funds and avoid all tax and penalties? My still-not-ex-son-in-law (aka albatross/toss pot/Lump of Foul Deformity…and a whole slew of other Shakespearean insults!) is making ever more preposterous claims to weasle out of accusations of fraud and embezzlement …the latest being that he raided his 401k to provide startup funds for the business back in early 2019. To the tune of $100k. He did do this so…against very strong advice…so that is not in dispute. What is being disputed (by him and his shyster lawyers) is that, when we found out, husband and I scrambled to get the funds put back in to hopefully avoid the financial hit.
This all happened end of February/early March. He/his legal team, after a couple of goes at outright denial, are now accepting that he did receive a check from us, missed the deadline and returned the check to us. What actually happened was that I gave a check for $100k to his financial advisor at the end of February (literally handed it to him in his office for him to take directly to the bank that day) Our bank account records clearly show that it was withdrawn from our account on 3/4/2019. I’m now trying to work out how big a lie he’s embroiling himself in. I just can’t come up with a question to type into Google that just gives me a straightforward date for this alleged deadline.
P.S…legal fees have topped $200k and are still rising.
Terribly sorry to hear of all of this. I hope your daughter is okay.
This is possibly all of the answer but it is so much money you are better off asking a tax lawyer. Criminal fraud in some form here might be different.
A 401(k) account holder can avoid penalties and taxes when putting funds back into an account by making a rollover within 60 days of receiving a distribution:
Action
Description
Rollover
Move funds from a 401(k) to another qualified retirement account or IRA
Tax treatment
Rollover funds aren’t taxed and aren’t considered distributions, so there’s no 10% penalty if the account holder is under 59.5 years old
Reporting
Report the transfer on a tax return, but no taxes are withheld
Deadline
Funds must be deposited within 60 days of withdrawal
Consequences
If the deadline isn’t met, the funds are treated as a withdrawal and may be subject to taxes and penalties
There are several other ways to avoid penalties when withdrawing from a 401(k), including:
Hardship distributions
Withdraw funds to cover immediate and heavy financial burdens, such as medical expenses, home-buying costs, or educational expenses
Age
Withdraw funds without penalty after reaching age 59.5
Disability
Withdraw funds without penalty if the account holder is permanently disabled
Death or beneficiary
Withdraw funds without penalty if the account owner has passed away or if the account holder is an account beneficiary and the account owner has passed away
Domestic abuse
Withdraw funds without penalty if the account holder is a victim of domestic abuse
Military
Withdraw funds without penalty if the account holder is a qualified military reservist who’s been called to active duty
When I first read this, and saw the bit about within 60 days, I thought “Aha! He’s lying!!”. Then I read it again and saw that it pertains to a qualified rollover?? Definitely not that.
Under the immediate financial need, I’m thinking that start up money for a veterinary hospital might qualify and this sort of business “loan” to oneself is just unusual enough that it’s not mentioned alongside medical expenses or homebuying costs. I just have the whiff of fish up my nostrils as I think about it now. I might’ve done at the time, under different circumstances, but this was in the immediate aftermath of husband’s open heart surgery… and the revelations of his financial prestidigitation that’ve surfaced of late.
Talk to an atty ASAP. IMO, a voluntary choice to start his own business would not qualify as it is not in the same category as a home purchase or medical need. Starting a business can be delayed as needed–until the financial parts are figured out (excluding retirement funding source). Medical care is “now or never”–or maybe no more taxpayer. The govt prefers taxpayers who will pay in the future, so it makes sense for the govt to allow a medical exception. Buying a house is a “location, location, location” issue, and turnover is relatively slow, so it also makes sense to allow an exception for a “once in a 30-yr time period” purchase that REASONABLY might not be otherwise available.
I’ve just sat in on about 40 minutes of a Friday afternoon conference call between my daughter and her divorce lawyer and compared to the issues commanding attention this week, this is pretty paltry. I’m just trying to fathom the rationale behind him/his lawyers denying the irrefutably undeniable.
Can’t decide if it’s the habitual lying becoming more of a habit…or his lawyers’ pettyfogging ways (yes…that’s a word) For the past 8 months it’s been week after week of putting out fires that should never have generated a glow…adding expense in the form of billable hours and detracting from the more relevant stuff.
If nothing else now he’s getting a taste of his own medicine
I haven’t really been following along on this story too closely so I’m unclear on a few things. I am not a lawyer, but I don’t see where the deadline makes any difference at all.
I understand that retirement accounts are typically considered marital property, so presumably your daughter would be entitled to some portion of his 401K.
It seems he made a $100K withdrawal from his 401K which he claimed he put into his and your daughter’s business. Is that right?
Then you and your husband gave him a $100K check to replace the money. Why? The penalty for early 401K withdrawal is 10%. You apparently paid him $100K to save the $10k penalty.
Then instead of returning the check as he claims, he actually cashed it. So you’re out $100K plus whatever portion of the $100K 401K withdrawal your daughter is entitled to.
So where does the deadline figure into this? He took the money and apparently still has the money. He can give whatever reason he wants, but he didn’t return the money. Hopefully you can claw that back, but bottom line is he has the money and you don’t. His excuses don’t matter.
One question I have is why he didn’t take a loan from the 401K instead of a withdrawal? That seems smarter than taking the penalty hit. But that actually doesn’t matter either as far as I can tell.
@syke6 …you’re reasonably on the money about the course of events except he did return our $100k. The question wasn’t so much a financial one involving our dosh …but rather building up a picture of the fabrication behind much of his/his lawyers’ case as we move closer to the final hearing. This has been the situation for the last 8 months…and longer as it’s turned out (I wrote a bit about some of his financial shenanigans a few months back which seemed pretty aggregious at the time…turned out to be pocket change.)
You said the magic words…“where does the deadline figure” and “excuses don’t matter”. They don’t as far as I can tell. This question only came up because of a fleeting remark in a rebuttal of the toss pot’s to responses from my daughter on an interrogatory (what $50k retainer lawyers call a questionnaire) In the Canker Blossom’s attempts to walk away from the marital gravy train with a long dreamed of payout in the region of $30mill (pure fantasy) he’s attempting to create an image of him being the mover and shaker behind the hospital set up. In response to my daughter’s itemisation (with evidence) of her contributions, he comes along with a claim that he’d used his 401k. Among all his other preposterous claims, this might’ve slipped under the radar…except I recalled the incident very clearly. My daughter’s response to his rebuttal to her response to the interrogatory (this is how these divorce lawyers earn their money) was that yes, he’d done that for some reason, but that we had provided him with the funds to replace it almost immediately in order to help avoid penalties etc…there was a flurry of back and forth almost along the lines of “oh no they didn’t, oh yes they did” culminating in the husband finding the bank supplied image of the cheque. Complete with the bank that held the 401k account as payee in presumably the financial planner’s handwriting and the rest in dh’s. However, the legal Whack-a-mole continued with his side then claiming the endorsement was illegible and they needed a clearer image…starting to cast doubt on whether the funds were removed from our account. For good measure, the Clod if Wayward Marl presumably added that he’d missed this alleged deadline and so had, in fact, returned the cheque to us…and, not only that, taken another $100k from the 401k in the December to cover payroll for that pay period. This multiple back and forth took place over the first part of this past week…for a good few thousand dollars worth of billable hours.
Just in case (familiar with his lawyer’s MO by now…a consistent, steady war of attrition) husband had also pulled up an archived statement for the weeks either side of the date the funds were withdrawn. Clearly show the activity on our account…we don’t go flinging this sort of money around every day!!! This was supplied to his lawyer on Thursday am…radio silence since, so I suspect that little game of Whack a Mole is over. Except it’s started me wondering…why such an attempt to refute our initial claim with an escalating tissue of lies. Force of habit…or a smokescreen for another shady financial ruse?
I’d mentioned the possibility of embezzlement months ago and we were waiting the results of a forensic accountancy audit. That turned out not to be quite the relatively straightforward task we…and the accountant himself…imagined.
The accounts themselves were in such a state that simple remedial work first had to be done and it looked like pure incompetence and mismanagement. The daughter wasn’t buying this as she and one of the internal medicine vets who has a bit of a knack for this detective work, it seems found so many instances of where he’d been using the hospital accounts and credit cards as his own ATM…and for obviously personal items (charging dating/singles services to the business, for instance)…she got a bit pushy. Just as well. A mixture of incompetence, “questionable” practices and good old fashioned theft, has racked up a sum of $3mill and change in funds he has to account for.
They’re (the opposing lawyers and their client) trying to wear you down. That’s the usual MO in these types of cases. You can choose to respond in various ways:
Use your own high-priced lawyers to respond to everything, and attempt to cause them more work (lawyer $$$, they love it).
Sometimes one side or another attempts to delay proceedings for various reasons (maybe more money is arriving in a year, so they would rather proceed in a year when they can pay for better/more lawyers).
This is what I would recommend. Find some sort of malfeasance on the other side that could be criminal. Slowly and methodically collect the evidence and store it safely. DO NOT LET THEM KNOW you are doing so. Once you have the full package, make copies and approach the other side ONLY VERBALLY in a face to face meeting with no recording devices. Present the package and then begin final negotiations. Unsaid, really best unsaid, that the package can easily be forwarded to an ambitious district attorney for potential criminal prosecution. And even if it eventually doesn’t get prosecuted, it’ll derail the other side’s life (including ten times the legal fees) for a very long time, with permanent aftereffects.
I have done that for a small business. Minimal records. Sales records were there, but purchases were hard to figure out. Paid invoices were vague, shall we say… Don’t know what happened, as I left after a bit.
@MarkR …oh yes. We’ve done all the above (hence the $200k and rising in legal fees. It’s quite extraordinary their (the lawyers) willingness to act as glorified stenographers for the albatross’s litany of drivel. Some of it laughable that we’ve just chosen to ignore (like accusing my husband of making threats on his life…that’s one of the more chortle-worthy examples)
The daughter has already engaged a firm (different from the divorce lawyer/business lawyers etc) to litigate the civil suit when she gives the OK. Since early February there has been the admonishment to “not appear to retaliate”…for instance, in blocking him from company accounts after he filched $120k from the payroll account (quite brazenly walking into two separate branches of the bank and getting a cashier’s check made out to him for $60k…almost as if to say “Up yours!”. Yes, there is obviously a psychiatric element here but we’re focusing on the spite and malice as a better target…there’s plenty of that in spades.
One of my sisters got a divorce about 17 years ago. He was an attorney. He decided he wanted a mediated divorce. She took the house and owned him 80k. They had a mortgage on the house she took over.
She stayed working in Boston even though the house was in the Hartford area. She commuted to the other sister’s house in the Cambridge area for a three day workweek. She worked remotely two or three days per week.
Before her oldest son went to high school she moved the boys back to Boston. They thrived fortunately.
The ex is a nice enough guy in some regards. He is a bit sad in other regards. He tried. As far as the good times in the marriage, he was a great guy. His kids we truly love. His way of dealing with the divorce was excellent even at that time.
Mind you, it’s not all misery and mayhem. Here are some of the photos from the hospital’s 5 year birthday party from their Facebook page.
The daughter is effectively helping them avoid bankruptcy (fingers crossed) by implementing some pretty obvious strategies. It’s a big enterprise…around 100 employees…so kudos for her stepping up and struggling because she has such a fabulous bunch of people who’ve supported her throughout.
I wouldn’t like anyone to feel left out if that link doesn’t work for them, so here’s the website…
It’s a fun endeavor to be involved in . Started with 11,000sq ft of space in this building…which was more than they wanted/could afford…which they very quickly outgrew.
I was under the mistaken impression that once the two parties agree to mediation, they MUST abide by what the mediator ends up proposing as a settlement.