Legal Question in Family Law in Wisconsin
401 k-plan
Both my husband and I have 401-k plans. My plan is vested value of 23,000, but with a 8,500 loan to be paid off in 9 more years it is only worth 14,500. My husband has a credit card debt for the approximately same amount as the 401k loan. My husband claims when he pays off his credit card debt he gets nothing out of it, but when I pay off my loan it goes back into the 401k plan. To make a long story short he thinks he should get half of the 23,000. amount. I say I don't get anything until retirement anyways and he can build up his 401k in the meantime. Oddly enough his 401 k is around 14,500. also. So what is the law in Wisconsin for this. We are trying to do the divorce on our own but have run into this snag. Any advice you can give would be greatly appreciated. Thanks.
2 Answers from Attorneys
Re: 401 k-plan
First, there are additional tax consequences neither of you have considered. If you fail to pay back the 401K loan, it will default and be considered income. You will be taxed at a rate of at least 20%. Additionally, as an early disbursement, a penalty of approximately 10% would be levied on the total. In your husband's scenario, you bear all the risk on the 401K loan and he reaps the benefit.
Additionally, if the loan was incurred for marital purposes (payoff of debt, repair the house) and you are dividing the marital assets equally, he has already received the value of one half of that loan amount in the form of the asset acquired or the marital debt extinguished. If you divide the full value of the 401k as he suggests and you pay back the loan yourself, he is paid twice --once by the benefit fderived from the loan and twice from the overvaluation of the 401K.
In short, he is wrong.
Re: 401 k-plan
I agree with Maury's post. I'm concerned about you doing this on your own. I think the money you save by not hiring a lawyer could be easily lost and then some. I suggest you seek competent counsel and save yourself a great deal of future grief. Good Luck.
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