Marital Property Includes Retirement Accounts

 Posted on September 22, 2015 in Divorce

According to the law in Illinois, nearly all property acquired by either spouse during the course of marriage is considered part of the marital estate and is subject to division in the event of divorce. This generally includes all wages derived from employment, even if those funds have been invested into a retirement account set up in the name of just one spouse. The same is true for a pension, as its value is attributable to the working effort of a spouse, which, in the context of a marriage, causes the asset to become marital property.

All, Some, or None?

If you have been actively saving for retirement for many years, it is very possible that your retirement account, including a 401(k) or an IRA, existed long before your marriage was even a consideration. The contributions and the resulting increase in value of the investment made during the marriage are part of the estate. The contributions and value increases prior to the marriage or after your divorce are not included in the division of property process.

As you approach divorce, however, you and your attorney are well-advised to consult with a financial professional to determine the portion of your retirement savings or pension that is subject to division. Such a professional can also help you establish the value of the marital portion. During the division of assets, you may be able to keep all of your retirement account, but the value will need to be offset by allocating other property to your spouse.

Using a QDRO

If dividing your retirement plan is necessary, you and the court will need to decide between two options. First, you may choose to transfer the share allocated to your spouse immediately into a separate account. Doing so effectively eliminates potential complications with disbursement in the future. Alternatively, the court may issue a Qualified Domestic Relations Order, or QDRO, to direct your plan’s administrator on how to distribute appropriate portions of your investments. This will ensure that, upon your retirement, your ex-spouse will receive the benefits negotiated in your divorce agreement.

Help for Your Complex Situation

Dividing a retirement account or pension can be complicated, just like many aspects of divorce. Fortunately, you do not need to handle it on your own. Contact an experienced Rolling Meadows divorce attorney today for the assistance you need at a potentially confusing time. When you have questions, we will work hard to provide the answers, and we will remain at your side every step of the way. Call 847-253-3100 to schedule your complimentary consultation.

Sources:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt%2E+V&ActID=2086&ChapterID=59&SeqStart=6100000&SeqEnd=8350000

http://www.livestrong.com/article/213009-how-to-calculate-a-divorce-settlement-retirement-amount/

http://aamlillinois.org/faqs-assets.cfm#q9