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In-service Marital Rollover™

Under federal and South Carolina state law, a spouse is allowed to transfer all or a portion of their qualified retirement account to the other spouse. This means that one spouse can transfer their 401(k) or other qualified account to the other spouse, who can then roll it over to an IRA, giving them more control and flexibility over their retirement savings.

Qualified Marital Rollover (QMR): What is it and Why Should You Consider It?

Federal and state laws allow a spouse to transfer all or a portion of his/her qualified retirement account to the other spouse. This allows a spouse to transfer their 401(k) to the other spouse, who can then roll it over to an IRA and have more control and flexibility, among other benefits.

Advantages of a QMR:

  • Avoids 10% early withdrawal penalty: Legally avoid the 10% early withdrawal penalty if you need to access cash from a retirement account. This could save you tens of thousands of dollars and allow you to pay off high-interest debt without penalty.

  • Leave the employer plan earlier than otherwise allowed: Reduce fees, access more investment options, and have more control and flexibility with an IRA, or even a self-directed IRA. Diversify your portfolio with alternative investments.

  • Delay minimum distributions by transferring to a younger spouse.

  • Rollover to an older spouse to have earlier access to funds.

  • Medicaid Planning: Transfer otherwise non-transferable assets, including a qualified pension, to the healthier spouse to help the declining spouse qualify for Medicaid.

  • Fund a Roth IRA: Roll over your 401(k) to your spouse's IRA and then convert it to a Roth (no income restrictions).

Disadvantages of a QMR:

  • Transfers rights to the other spouse: Your spouse can legally do as they see fit with the new account. We can eliminate some of this risk through our marital contract. This should only be considered for trusting spouses in a healthy, long-term relationship.

  • Plan loses ERISA creditor protection: IRAs are not under ERISA, and therefore are afforded less asset protection than employer-sponsored plans.

The QMR Process:

This is a court-overseen process whereby one spouse transfers their interest in their qualified account, in whole or in part, to the other spouse, and a local judge signs an order granting the transfer. The order is then sent to the plan administrator, who distributes the assets according to the order.

If you have questions about QMR or other estate planning strategies, please don't hesitate to contact us. 

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