Do I Have to Share My Retirement Funds With My Spouse in a Divorce?

 Posted on February 17, 2022 in Divorce

Saving for retirement is a top concern for many working adults. Many people dream of living out their golden years enjoying hobbies and spending time with loved ones. Understandably, divorcing spouses often wonder if their divorce will threaten their retirement plans. They question whether retirement funds that they earned on their own are considered shared property for the purposes of divorce.

Classification of Retirement Accounts in an Illinois Divorce

There are two main categories of property in an Illinois divorce case: marital property and non-marital or separate property. Almost every asset or debt that a spouse acquires during the marriage is a marital asset or debt. Property acquired through inheritance or gift are two notable exceptions. Assets and debts that a spouse had before the marriage are classified as non-marital.

Retirement accounts are unique assets in that they may be considered partly marital property and partly non-marital property. The portion of the retirement funds that a spouse earned before getting married may be non-marital property while the portion of the retirement account earned during the marriage is marital property that is divided during divorce. Both spouses have a right to an equitable portion of marital assets. Therefore, it is possible that you will have to share your pension, 401(k), or IRA funds with your spouse.

What is the Best Way to Address Retirement Money in a Divorce?

Divorcing spouses may be able to negotiate the terms of property division without the court’s involvement. However, it is highly recommended that divorcing couples work with a financial expert in addition to their lawyers to determine the best way to do so. Often a Qualified Domestic Relation Order (QDRO) Is used to instruct the retirement plan administration to divide the funds between the divorcing spouses. The QDRO may order the immediate distribution of retirement funds or the funds may be distributed to the spouses upon retirement.

Div

orcing spouses should pay careful attention to the potential tax consequences of retirement asset division. Some couples choose not to divide the retirement funds at all. Instead they assign retirement funds to the spouse who earned the funds and offset the value of the retirement account with assets of equivalent value. For example, one spouse may keep the retirement money while the other keeps the marital home.

Contact an Arlington Heights Property Division Lawyer

If you are getting divorced, contact skilled Rolling Meadows divorce attorney Donald J. Cosley for help. Mr. Cosley has over two decades of experience handling divorce concerns including the valuation and division of retirement assets. Call the Law Offices of Donald J. Cosley at  for a confidential consultation.

Source:

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm