Annuity/child support

Okay... Here's my situation folks. I have an annuity that was created by my union (I'm no longer a member of) that has been growing since 1997. I am now self employed in a new career and need to withdraw the entire annuity (about $25,000) in order to buy desperately needed equipment.
My concern is that 15 years ago I discovered I had a child when Child Support Services informed me that I owe them $20,000 in back support. That's a long story in itself. I admit that I have not been perfect in making my payments, however I have done pretty well with the exception of the last 4 months.

Question #1) Child Support Services automatically report delinquency to the California Franchise Tax Board. I don't know if this has happened yet, but if so...
Can the California Franchise (or federal) Tax Board absorb my entire annuity when I try to withdraw?

Question #2) How can I check to see if I have a negative standing with the Tax Board?


For the past 5 years I have worked diligently to position myself properly for this moment. If I can withdraw this annuity I can not only continue to make my child support payments, but I can have my back support payed off within a year. Otherwise, I will be forced to return to my old line of work that offers no chance for advancement and I will continue to live in debt. In other words, it's do or die.

Thank you in advance for any insight/advise you can provide.

http://www.childsup.cahwnet.gov/Payments/CustomerConnect/tabid/71/Default.aspx

to check your status on child support payments. if you are good here then you are pretty much certain there is no enforcement or garnishment in the works.

http://www.ftb.ca.gov/online/myacct/index.asp

to check your status.

by the way, this will help you determine the present status for your case and situation. what may or may not happen and subsequent impact on you is much better answered by a family law attorney in your state.

that said, a couple of other issues to consider. you are likely to have a tax hit to consider. remember, the beauty of the annuity is that you defer taxes. if you never paid any taxes whatsoever, the taxes on 25K would be assessed at your income tax rate ... and 25K may put you into a higher bracket.

you imply that you are only 4 months behind. but you are concerned about having the entire liquidation amount seized?!? you may want to really understand what you got, what you will get, and what is actually owed.

finally, annuities usually have creditor protection ... though i am unsure how California law may impact this especially for child support issues.

if you will really be able to move your business forward with this relatively small amount of capital, perhaps you should consider a business loan. all of the good things happen, without angst over the annuity and how California in particular may impact it.

Jeff D,

1_more_opai has offered some good advice.

Some more things to consider:
- Do you provide over half of the support for this child? Do you claim the dependent deduction on your tax return? That is tuff to do when you are behind in your support payment.

Certainly any federal or state tax refunds may be used to pay your back child support instead of coming to you.

I certainly agree with the idea of getting a business loan for the equipment. The interest you pay on this loan is a business expense and will reduce your profits from the business. This would also reduce your income tax and your Self Employment tax.

As was pointed out, taking the annuity will increase your income, and if you are under age 59.5 years will likely require a 10% penalty. The annuity may require a 20% withhold for taxes, that would mean you would only receive about $20,000.

Think this through carefully.