Worcester, MA asked in Tax Law for Massachusetts

Q: What would Massachusetts State tax, Federal Tax and any fines and fees be on early withdrawal of a retirement fund?

I am disabled and collecting SSDI in Massachusetts. My spouse has offered an out of court divorce settlement of a TIAA in with four accounts totaling $110,000 (Qualified Retirement Plan, Tax sheltered annuity plan, Tax-deferred annuity Plan, Define Contribution retirement plan).

I would like the cash to buy a condo, or buy in as partial owner of my mother’s house. I would not like to roll this into my own retirement fund. I receive Medicaid and would not be allowed to keep the retirement account, and would have to spend it down in order to still be eligible for assistance.

Related Topics:
1 Lawyer Answer

A: Federal would be ~24% depending on other income and deductions and 5.05% for Mass.

Because the transfer is pursuant to a divorce your spouse doesn't have any tax ramifications for withdrawing the funds and you only have to pay tax on taxable withdrawals, no early withdrawal penalty. You have to have a QDRO.

You should also consider the effect of an income spike on your SSI.

I would hire a professional to make sure the separation agreement does what you think it should do, the QDRO is properly drafted, and you can minimize the tax hit of a lump sum payout

1 user found this answer helpful

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.