Dividing Retirement Accounts in Divorce

 Posted on December 05,2022 in Divorce

 Retirement accounts and pensions can be major issues in many divorces because they can be the most valuable assets a married couple owns. 

The parts of retirement accounts that are classified as marital property will need to be addressed during divorce, and one spouse paying into a retirement account or pension during the marriage usually makes the retirement account or pension partially marital property. Retirement accounts can be complex assets to divide, so it is important to work with a skilled divorce attorney.

Retirement Plans and Your Ilinois Divorce

Retirement accounts include a wide variety of possible plans, including:

• Defined contribution plans

• Individual Retirement Account (IRA) plans

• 401(k) plans

• 403(b) plans

• Traditional pensions

• Thrift Savings Plan (TSP)

• Guaranteed income annuities (GIAs)

• The Federal Thrift Savings Plan

• Cash-balance plans

• Cash-value life insurance plan

• Nonqualified deferred compensation plans (NQDC)

Funds added to a retirement account during a marriage are classified as marital property. Funds that were added to the account before the marriage are non-marital assets. After the parties determine exactly how much of a retirement account is marital property, they can begin negotiating. It may be possible that one spouse keeps the entire retirement account in exchange for a motor vehicle or other asset. Alternatively, the spouses may divide the assets contained in the retirement account.

Retirement Account Division During Divorce

Retirement division orders state what happens to retirement accounts after a divorce, and the three main types of orders include:

•  Qualified Domestic Relations Orders (QDROs) that relate to private company pensions, 401(k), and similar accounts

• Qualified Illinois Domestic Relations Orders (QILDROs) that divide retirement and pension benefits for Illinois government employees

• Military Retired Benefit Division Orders that divide military pay for retired veterans such as pensions or thrift savings plans (TSPs)

After an order is drafted, it will have to get approval from a retirement plan administrator. When the administrator denies a draft, they should note what needs to be fixed and people can earn approval by making the necessary changes. After the plan administrator accepts the draft and the court issues final orders, a spouse can submit their order for execution. 

Contact a Will County, IL Divorce Attorney

If you are going through a divorce in Illinois in which you know retirement accounts are going to be an issue, make sure you have legal representation on your side for help determining exactly what needs to be paid. The Naperville divorce lawyers at Law Office of Ronald L. Hendrix, P.C. handle all kinds of complex property division issues. 

Call 630-355-7776 or contact us online for a free consultation.

Source:

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