Another story of bad lawyering. Why didn't her lawyer include that in the pleadings during the divorce. shheesh. Without any further written directive, it would have to be assumed that the court intended, when it ordered the 401k to go to her, and then further ordered the 401k to be acessed ( early) to pay debt, that any penalties or tax would be bourne by the owner ( the wife).

I would motion for a clarification and ask in the clarification for the court to ordert any penalty and tax to be paid by the beneficiary of the early withdrawal ( the husband); but you would need to have a court order stating such, or just like any owner of a 401k , the owner bears the tax and penalty for an early withdrawal

Depends on how this was done. If his 401k was rolled into hers and then she took money out to pay off the debt, yes, she'll be assessed the penalties/tax.

If the money came out of his 401k, and he then gave her the money, he'll pay.

I agree SRDEsq, poor lawyering. I also agree there needs to be some clarification. I had read elsewhere that 401k transfers in divorce proceedings are not subject to the early withdrawl penalty, is there any truth in this?

"Qualified distributions made to an alternate payee under a qualified domestic relations order" is a valid exception to the 10% early distribution penalty. Regular income tax would still apply.

But it has to be stated as a QDRO and handled as one.

As part of my own divorce settlement, I rolled one of my 401k into my former spouse's 401k via a QDRO to pay him his equity share in the house, which I kept. No penalty or taxes to me at all.

We will all wait for clarification by the asker, as usual Reader is up on the rules of retirement plans, taxes , et al