Q. I am afraid my husband may liquidate our 401k and IRA's that are in his name. Is there anything I can to do freeze the accounts or make sure he can't empty them out before I can hire a lawyer or file for dissolution?

There is always the risk that one party will loot the community estate in anticipation of a family law proceeding, or that they may even act innocently but still wind up depriving the other spouse of their community interest in a pension asset.

If the spouse in whose name an IRA, 401k, or other pension device is held wants to access these monies and you object, or just want to make it impossible for them to do so without first securing your agreement, there are important steps that will work so long as you undertake them in time.

Two situations with pension plans or retirement assets are common: 1) a retired or disabled spouse is already drawing upon them on a monthly or other basis and 2) or they may want to liquidate the account entirely. The latter situation is especially common, in my experience, with plans valued under $50,000.

Lets assume your husband has a Roth IRA for $50,000. It was opened during marriage when all contributions were made, and half therefore belongs to you. He instructs Fidelity Investments to cash it out. Since this is an early withdrawal (presumably), there is a both a 15% penalty to the IRS (unless the money is rolled into a new IRA within 60 days, or the withdrawal occurs within 60 days from the date of entry of a Divorce Judgment dividing the assets) and the monies he receives will be taxed as ordinary income at rates that depend upon his bracket.

If there is sufficient other property in the community estate to ensure that you will get your half from some other source down the road, this may not be a problem for you. However, down the road has a habit of never arriving and in this economy other assets from which you expected a reimbursement might evaporate.

Perhaps, this is not okay with you from a number of angles. For instance, an exception to the automatic restraining orders contained in the California Dissolution Summons regarding the prohibition from invading accounts allows parties to do so to generate the monies to hire their lawyers. These "ATRO's" will not likely protect you from this type of withdrawal after the fact - however, it may protect you as a preemptive strike. As always I urge you to act fairly and not to abuse power or be manipulative in your divorce.

You have a couple of options for protecting your interests, including joining the pension plan into the family law proceedings.

But the most important and immediate device you can use is a notice to the Plan Administrator pursuant to Family Code section 755(b). Essentially this written demand tells them that you are claiming an adverse interest in the pension assets and its legal effect is to put the Plan on the hook for any payments they make after receiving the notice. They will not release any money once you properly draft and serve it.

Serve it either personally through a process server (which may be difficult and expensive if they are in another town or state), or by registered or certified mail, return receipt requested.

Keep in mind that joinder of certain types of pensions - like federal public entity plans - cannot be achieved through a California joinder pursuant to Family Code section 2060. Thus, this §755 Notice is really important to freeze the status quo pending an ultimate QDRO.

By the way, this will also work to freeze other forms of payments - for instance from insurance companies.


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