Do you pay taxes on lump sum received from ex husband for his retirement?

Question

My fiance received a large lump sum, in the form of a cashiers check, from her ex husband after he retired. Is that taxable income? taxable gift? She says since it was in the divorce decree that she receives a certain percentage of his retirement that it would be considered alimony. Since he always pays in cash or check, where would she place the income on the tax files if no tax forms are ever sent out to her, ie: 1044 etc.

Answer 1

can't be a qdro...that would have to have been enforced prior to the distribution. And the distribution would have to be made directly to her from the trust.

As for alimony? Totally depends on what the divorce decree states as per future payments and the payment of that retirement. This is really up to an attorney who would need access to the divorce decree. But I would guess if the document says something along the lines of she is to recieve $600/mth for life then it's a taxable gift. But if it says $600/mth for life PLUS a portion of ex's retirement then it can be considered alimony.

But that's just an opinion that has no legal standing or support.

Answer 2

One way or the other, if it's not rolled over in a timely manner into an IRA, it would be taxable income. If the decree specifies that it would be considered as alimony, then it might not even be eligible for rollover. And unless she got it very recently, it's probably too late anyway to roll it over.

She should probably have an accountant, not an H&R Block type agency, do her return for this year.

Answer 3

It's probably a QDRO (Qualified Dpmestic Relations Order) pronounced QUADRO.

If so, the money must be rolled over to an IRA type account withn 30 days. Otherwise it is taxed as a distribution subject to your regular tax, but not subject to the 10% penalty. If it's rolled over, there's no tax.