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How Are Retirement Accounts Divided in an Illinois Divorce?

Posted on in Divorce

Kane County divorce lawyersIf a couple has been married for many years, the decision to divorce is not an easy one. Since a lot of time and effort was put into the marriage, it can be devastating both emotionally and financially for one or both of the spouses. The division of marital assets is an issue that needs to be determined during the divorce proceedings, which can cause a lot of conflict if the spouses do not agree on how to divide everything, especially financial assets. One or both partners might have retirement accounts such as 401K, IRA, or pension. Even in an uncontested divorce, splitting the retirement assets can be confusing, so it is helpful to seek legal counsel to make sure both spouses receive what they deserve.  

What is Considered Marital Property?

According to Illinois divorce law, any marital property will be divided fairly and equitably, but not necessarily equally. This is referred to as “equitable distribution.” Marital property is generally considered all property acquired by either spouse during the marriage. This can include real estate, furniture, and vehicles, in addition to financial and retirement accounts.

A spouse may be entitled to a portion of the other spouse’s retirement plans, such as a 401(k), IRA, stock options, or pension benefits, and vice versa. If a spouse pays into a retirement account or a pension during the marriage, at least part of that account or pension is considered marital property, regardless if only one spouse’s income was paid into the account. All pension benefits, including those under the Illinois Pension Code, as well as stock options, acquired by either spouse during the marriage are marital property, regardless of which spouse participates in the pension plan.

Illinois courts consider many factors when deciding how to split property, including how long the marriage lasted, what each spouse contributed to the value of the marital property, economic circumstances of each spouse, and future income earning for each spouse. Illinois courts do not consider which spouse is at fault for the divorce when determining division of marital assets.

Court Orders for Division of Retirement Accounts

The Qualified Domestic Relations Order (QDRO) is an order made by the court that is typically entered after the divorce is final. This order explains the way a retirement account will be divided with instructions for the retirement plan administrator on how to execute the asset division. The QDRO must be approved by the plan administrator and then submitted to a judge (as well as the order for marital dissolution), who signs off on it. Then, the executed order goes back to the plan administrator.

The majority of retirement accounts require a QDRO to be divided. The exceptions to this are IRAs and any retirement plans governed by the Illinois Pension Code that require a more specific document known as a Qualified Illinois Domestic Relations Order, or QIDRO. These orders should include date of marriage, date of divorce, and the percentage awarded to each party. They should also include any survivor or death benefits.

It is important to follow the proper procedures for dividing retirement accounts in a divorce since there can be tax consequences due to early withdrawals, depending on the type of account.

Contact a Barrington Divorce Lawyer

Divorce can be a complicated process, especially when it comes to dividing financial assets such as retirement accounts. Determining which spouse is entitled to what and when can be confusing. The attorneys at the Law Offices of Benedict Schwarz, II P.C. are experienced in marital asset division, including rights to retirement plans and benefits. Our legal team will make sure you receive what you deserve in your Illinois divorce. Call a Geneva retirement assets division attorney at 630-200-4882 for a free consultation.

 

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2086&ChapterID=59&SeqStart=6000000&SeqEnd=

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