How Does Divorce in Illinois Affect Retirement Savings? 

 Posted on July 13, 2021 in Asset Division

Retirement funds, such as pensions and 401(k) accounts, are often a substantial issue in an Illinois divorce. For a couple who have earned average incomes throughout the duration of their marriage, retirement accounts can make up the majority of their accumulated wealth. As such, spouses are often concerned with the impact of a division of retirement savings as a consequence of their divorce.

In our last post, we discussed the impact of divorce on Social Security benefits. Here, we will examine the way that retirement accounts are handled in a divorce.

401(k) and Contribution Plans 

Unless spouses signed a valid prenuptial agreement stating otherwise, 401(k) plans with contributions during the marriage are considered marital property and may be subject to division. Though contributions from before the marriage may remain non-marital assets, contributions during the marriage belong to the marital estate.

Because a 401(k) usually has a determinable value at any given time, it can be more straightforward to divide than a pension plan, for example. However, it is still important to obtain a Qualified Domestic Relations Order (QDRO) directing the transfer of assets from one spouse to the other, so as to avoid early withdrawal penalties or immediate income tax consequences.

Pension Plans

Although pension plans are much less common than they used to be, government employees often still have them, as do high-level business executives. A pension recipient may never contribute money out of their pocket into a pension plan, but a plan that is active during a marriage is still considered marital property.

In order to assess the value of a pension plan for the purposes of asset division, you will likely need to hire an actuary. An actuary will determine the value of your pension plan, the percentage of the plan to be considered a marital asset, and the amount of the pension to which both spouses are entitled.

Once the pension plan is evaluated, spouses will need to decide how to split it. The most common solution is for the pensioned spouse to buy out the non-pensioned spouse, and take a lesser portion of the other marital assets. Otherwise, spouses will have to wait until retirement to split the pension payments using a Qualified Illinois Domestic Relations Order (QILDRO).

Contact a Wheaton Divorce Attorney

Understanding the impact that divorce is likely to have on your overall financial situation, including your retirement accounts, is a crucial part of the divorce process. The attorneys at Goostree Law Group have extensive experience dealing with the financial implications of divorce and will advocate for your interests in order to obtain the best possible outcome. Contact a DuPage County divorce attorney today at 630-364-4046 to schedule a free and confidential consultation.

Source:

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt%2E+V&ActID=2086&ChapterID=59&SeqStart=6200000&SeqEnd=8675000