I recently got divorced and had to sign over the mutual funds to the ex per the judgment of divorce. The account was in the trust name and was supposed to be changed to just her. I knew she was going to try to cash it out as soon as she could. They issued her a check for the entire amount and it has my name on it. I am not sure how it's made out or to who, but she can't cash it and I refuse to sign it. I do not want it counted as income on a 1099. The trust is under my SSN for tax purposes as well. The mutual fund company said to give my judgment of divorce at tax time to a tax agent and it shouldn't be an issue. Well, I have repeatedly asked them to put it in her name only. She somehow got the account closed and a check issued. I did not authorize the account to be closed as an individual or trustee. I am planning on stopping at the accounting office after work, but not sure what route to take. I do not want this counted as income for my taxes. Feeling frustrated and any insight is appreciated.

willy

So the divorce judgement required you to sign over mutual funds to the ex.
But you have not yet signed anything?
The ex has closed the account by means unbeknownst to you and has a check as a cash out made out to at least you?
I would say you need a lawyer for tax purposes and to draft an air tight signed/notarized release of any transfer as required by the judgement.
I am puzzled whether you are tax liable since its a judgment for release of the funds, or by you signing the check you have a capital gains conversion for you and a "gift" to her.
Get a lawyer.

This is really complex. 3 areas of expertise are all needed: Divorce attorney, CPA/tax expert, trust expert attorney. You need to find the right expert who combines all those credentials, and pay them a big fee to solve this. Soon, don't wait until it snowballs. It's easier and cheaper to pre-empt than to unravel later.

The judgment said I had to sign them over. I let the company know what was happening and that they were going to be signed over to her so we could get the information needed and the ball rolling. The company was informed the day of the divorce (9/15/2023) didn't do it as I asked. It was to be in her name only. on 11/16/2023 I got a text from the ex saying I needed to sign the check because my name is on it. The online account information shows it in the trust name and not mine and closed and her address instead of mine where it was before, so I have no idea who the check is actually written to. I am not wanting to be held liable for it as income to me or paying any taxes on it since they are not my funds. But she was money hungry and jumped on everything she could get. She didn't get as much as she could have, but it is what it is. I had a feeling she just wanted this account to close it and get the cash. If she would have waited, I was working on correcting the account name. Every time the company said it was corrected, it wasn't. I figure one of two things will happen: I get stuck paying taxes and she forges my name to deposit it or I get stuck paying taxes and the check runs out of time to cash it because I'm not signing it. I will know more after I talk with the company that does my taxes after work. It's a check for about $13k, so not a huge amount, but it's not going to me so I don't want to pay any taxes on it. The small amount of taxes I would pay would be cheaper than a lawyer I'm sure if I have to go that route.

$13k check. Not really worth hiring a lawyer for big bucks. I am thinking of asking the company for any and all papers that lead to the issue of the check since it has my name on it and I didn't ask for a check.

Return the check and make them reissue a new one

Have you seen the actual check? If the info you have available shows it to be in the name of the trust, it sounds like she has figured out that she's gonna be the one paying the tax on it and is trying to pull a fast one on you. If the check is coming from your retirement account at work, you need to have a Come to Jesus meeting with the HR person and tell them it needs to be straightened out, like YESTERDAY. Their screwup could cost you several thousand $$ in taxes you shouldn't be responsible for. Starve the ex out as long as you can and she will get more agreeable. Sorry for your troubles.....been there, done that!

13K ... peanuts. Besides, unless I'm mistaken you invested in the funds with "after tax" dollars, so you should only be taxed on the "gains" and even those will have a portion that is not taxable.

As an example ONLY ...

investment in mutual funds with after tax dollars $5000
present value 13000
total gain 8000
tax free portion 50% -4000
taxable portion at your taxable income rate 4000
tax owing at 35% taxable income rate 1400 You can't walk in a lawyers office for less than that !!

There's also a good chance the investment firm held back the tax. You should check that !! Generally the government gets their pound of flesh FIRST !!

Sorry to read about the issue.

If the funds were in a taxable account, not an IRA/retirement, you may be able to flow the funds into the trust, then set it up as a payment to her with a 1099 to her for the full amount. Most living trust recognized income flows through to the beneficiary without a return required, you may want to file a return for the trust. Get an EIN for the trust now, just in case, easy to do on the irs website.

If they are in a retirement account, not sure why if it's a trust, then the layers of fuckery get deeper.

Last resort, if the investment company doesn't get it straightened out. The issue there is the company, does she have any named accounts with them? No account, no standing... you are the point of contact regardless of the court decree. File your return and include statement of facts why you didn't include the amount in your return. Attach a copy of the decree, her 1099 for full amount from you and make sure to mail 1099 prior to the deadlines.

Might be smart to get a notarized statement from her that she will get a 1099 for the full amount.

Taxes can be a mess and I absolutely understand your desire to not take on an additional liability that isn't your responsibility.

Get a couple of free consultations with CPAs in the area and ask about these thing and ways you can avoid the liability. I think the 1099 route may be the easiest with the court decree as the driving force.

I had to transfer $250K to my ex-wife in my divorce. I had her contact her own financial company and open up her own 401K/retirement account - like mine.I insisted that she do that. I was then able to transfer the money from one tax deferred account to another. That solved the tax issue for me. If she wanted to take the money and run the transition to cash was from her account not mine.

Odds are, if your name is on the check, you'll be reporting that amount as income for 2023.

Your next stop after the accounting office should be your lawyer's office.

Alimony is deductible from your income and is listed as income for her. I do not know if it applies here but if you have time to be put on hold you can call the IRS and talk to an agent. They may or may not have insight into forms and what needs to be done.

Good luck

Nothing the IRS shares with the OP verbally is legally binding nor necessarily correct.

I have not seen the check and have asked the company what needed to be done to issue a check in just her name. We started the mutual fund account in July of 2018 and she closed it in November of 2023. The trust is under my SSN so if it's cashed by the trust, it's still on me. It was only a few hundred a month to get a cushion until I could take from my retirement 401 and rules changed and I can draw without penalties as soon as I retire. $11,200 was put in an was cashed out at $13,000. I am not sure if taxes were withheld or not. Last years 1099 showed "total ordinary dividends $44.43" "qualified dividends $44.43" and "total capital gains distributions $1,326.88". We haven't drawn anything from the account prior, so I'm guessing distributions is something to do with money made in the account and used to purchase more shares. Only $400 was put in for 2023. I am going to email the company back today to ask for an image of the check or at least who it's made out to and any documents relating to closing the account.

You need to quit asking and start telling.

I'm assuming you are the Trustee of said account and someone other than yourself has disbursed funds from the account.

As Trustee, YOU administer the account, and you alone. Any one else who does so without written delegated authority is acting as Trustee de Son Tort and can be held liable for any injury their actions may cause.

I would make it very clear to them that any tax liability you may have incurred due to their actions will be on them and that it will be in everyone's best interest for them to rectify this post haste.

Kevin

That's what i would look at doing. Get it all transferred to her before they pay out. Will probably save you headaches down the road too being disassociated from it.

We are both listed as trustees. However, it says a majority of trustees must agree. 50% isn't a majority. I emailed the company asking for a photo of the check to see who it's made out to, documentation asking to close the account, and if it's in the trust name did they follow the trust rules as far as signatures? No response yet.

Are both SSN's listed on the account or just yours?
Not that would be the controlling factor, but it certainly will be the trigger and target for the IRS to seek potential amounts due, besides with IRS, the burden of proof to contest the IRS position in their eyes, is with the taxpayer.

The mutual fund company has both our SSN's associated with the account. However, I think the check is in my name and/or the trust name (my SSN) but it could be in both our names or the trust only. Either way, the ex says it has my name on it. I emailed the company and requested any documents about closing the account and an image of the check to see who it's written to and told them I'm not signing until I see those and they may have to issue a new check if this one expires.