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Do I Need to Liquidate My 401k or IRA Retirement Account to Pay Alimony or Child Support Arrears?

Although 401K accounts and IRA retirement accounts are generally protected from creditors, they may not have the same protection against an ex- spouse regarding the payment of alimony or child support arrears.  Stated another way, if you are owed either alimony or child support, do you have a right to collect the monies owed from your ex-spouse’s retirement accounts?

Statutes that were designed to protect the family assets from creditor claims, so that the family would not become dependent upon the state for support, do not afford an individual the same protection against their ex-spouse for the payment of child support or alimony arrears.

In order for a spouse to reach funds held in a retirement account, whether it be an IRA or a 401(k), there must first be an existing support order.  Next, there must be a finding by the court that there are in fact arrears owed pursuant to that court order which have accrued as a result of nonpayment by the obligor.  If the court makes an affirmative finding that the obligor has willfully refused to pay support obligations, he or she may be found in contempt of court.

Once an individual is found in contempt of court, the court will then decide the total amount of the arrears, and the rate at which those arrears will be repaid.  The court does have the right to look to funds that are held in an IRA or a 401(k) to pay the arrears.

These were the precise set of facts that existed in the case of Siegel v. Siegel.  Mr. Siegel owed a substantial amount of support obligations to his ex-wife.  Although Mr. Siegel was employed, he continued to deposit funds into a retirement account.  The court, in their opinion, stated that you don’t have the right to “hoard your assets” and put the funds in a retirement account, and avoid paying your support obligations.

The Siegel case stands for the proposition that once you are held in contempt for nonpayment of support obligations, funds and retirement accounts can be obtained as a source to satisfy any existing arrears. The funds are not protected in the same way they would be from third-party creditors, such as credit card companies medical bills, or financial claims from parties other than an ex-spouse.

In another case from the Tampa area, Wix v Wix, Mr. Wix successfully argued in the trial court that he did not have the ability to pay his full alimony obligations.  His financial affidavit reflected a deficit each month, after paying a portion of his alimony payment.  He did have money set aside in his 401(k) account.

This decision was reversed when the former wife, unhappy with the trial court’s ruling, filed an appeal. On appeal the appellate court said that any funds in a retirement account, including a 401(k) or an IRA can be applied towards the payment of outstanding alimony or child support arrears, whether or not there is an existing order of contempt.

The Wix case is a little bit different than the Siegel case.  In the Siegel case, there was initial finding of contempt, which established the amount of support obligations that were owed.  The court stated that those funds could be used to satisfy the finding of contempt by the court.

The Wix case stands for the proposition that there need not be an initial finding of contempt.  Funds in retirement accounts can be used to satisfy support arrears regardless of whether or not there was a pre-existing finding of contempt.

So what does all this mean?  Simply stated, funds that are normally protected from bill collectors and other critors like credit card companies are not afforded the same protection in Family Court under Chapter 61 proceedings.

Chapter 61 is the statute that governs dissolution of marriage actions in the State of Florida.

There is a lot at stake when you are dealing with support obligations, contempt, and funds in retirement accounts. Call Attorney Alan R. Burton, a divorce attorney in Boca Raton, Florida who has years of experience dealing with support obligations in divorce cases.  Call him today for a free consultation at 954-295-9222.