Many people work for a long time in order to save for retirement. Others may have a pension, or they may have invested in mutual funds or IRAs so they can live comfortably after they are done working. If a married couple decides to part ways, they may wonder what will happen to their assets in a divorce, including their retirement plans. Under Illinois law, marital assets are divided in “just proportions”. This means any assets acquired during the marriage will be divided fairly between the spouses. It is important to understand what retirement assets you are legally entitled to.
Dividing Retirement Accounts and Pensions
If retirement accounts were created or contributed to during a couple’s marriage, they are considered to be marital property. The balances in these accounts are usually divided equally between the spouses but a couple may choose to agree on another way to divide these assets. Once it is determined how any retirement accounts will be divided, the retirement plan administrator must be given the details of the division and how that division will be executed. Different types of retirement accounts require different steps to carry out the division of the retirement account and for 401(k)’s this is done is through a Qualified Domestic Relations Order (QDRO).
By using a QDRO, funds can be withdrawn or transferred from a retirement account, and the account owner will not be required to pay penalties or taxes on the withdrawn amount. QDROs are typically entered once the divorce is finalized. The majority of retirement accounts, including 401(k)s, require a QDRO before they can be divided between spouses. IRAs are considered a different type of retirement savings and do not require a QDRO.
Retirement plans under the Illinois Pension Code require a different procedure that uses a Qualified Illinois Domestic Relations Order (QILDRO). This is because pension benefits may not be available at the time of the divorce, and they will only be paid after a spouse retires. The other spouse will be entitled to receive a percentage of these benefits based on the number of years they were married while the spouse contributed to the pension plan. A QILDRO will instruct the pension plan administrator to pay a percentage of the spouse’s pension benefits to the other spouse when the spouse begins receiving these benefits. A QILDRO will not affect how the benefits accrue or any of the vesting requirements.
Wakenight Attorneys have Experience in Handling the Division of Retirement Accounts
Saving for retirement is an important aspect of your life that can significantly affect your future plans. If you are getting a divorce, you may be worried about how retirement plans or investments will be split between you and your spouse. The experienced attorneys of Wakenight and Associates, P.C. have handled many divorce cases that involved significant financial issues. We can help you navigate your new financial landscape and ensure you receive a fair settlement.
COVID-19 has forced us to work remotely. We are available for video conferencing, however, and our corporate phones are now in our homes. We have several numbers where you can reach us: 708.848.3159 or 815.727.6144 or 630.852.9700. Our experienced attorneys can help you. We welcome your questions and calls.
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