When Is a QDRO Needed in an Illinois Divorce?

 Posted on August 06, 2021 in Property Division

During the divorce process, spouses will need to address multiple types of financial issues. Many of these issues will be related to the division of marital property, in which spouses must determine how all of the assets and debts they acquired during their marriage will be allocated. While dividing some types of property may be a straightforward process, a variety of complex considerations may arise when addressing assets such as retirement savings and benefits. A qualified domestic relations order (QDRO) may need to be created to ensure that these assets are divided properly, and an experienced family law attorney can make sure this type of order is created and executed correctly.

Benefits of Using a QDRO

Spouses will often save money in retirement accounts, including 401(k) accounts provided through an employer or individual retirement accounts (IRAs). Depending on the decisions made during the property division process, the funds in an account may be divided between the parties. However, if the proper procedures are not followed, withdrawing funds from an account before the account holder reaches the age of retirement can result in penalties, and taxes may also apply to these withdrawals.

Early withdrawal penalties and taxes can be avoided through the use of a QDRO, which is a court order that instructs the administrator of a retirement plan to distribute funds to someone other than the account holder. A QDRO may state that a specific dollar amount or a percentage of the funds in an account should be withdrawn and transferred to the account holder’s ex-spouse. In addition to allowing funds to be transferred without incurring penalties, taxes will not apply if the recipient rolls the funds over into a retirement account in their own name.

QDROs may be used for qualified retirement plans, including 401(k) or 403(b) accounts. For IRAs, a “transfer incident to divorce” may be used, and this will follow a similar process as a QDRO. Pension benefits may also be allocated using a QDRO, and a special type of order called a Qualified Illinois Domestic Relations Order (QILDRO) must be used for retirement benefits provided to state employees. Since the amount of pension benefits that a person will receive will usually be unknown at the time of a couple’s divorce, a QDRO or QILDRO will state that once the person retires and begins receiving benefits, a certain percentage of their pension benefits will be allocated to their ex-spouse.

Contact Our Will County Asset Division Attorneys

Retirement benefits are just one issue that you may need to address during the divorce process. The Law Office of Ronald L. Hendrix, P.C. can help you understand the different financial concerns that will play a role in your case, and we will advocate for your interests and help you achieve a positive outcome in your case. To get help with QDROs, retirement accounts, and other issues related to your marital assets, contact our Plainfield property division lawyers today at 630-355-7776 and arrange a free consultation.

Sources:

https://www.investopedia.com/personal-finance/whats-qdro/

https://money.usnews.com/money/personal-finance/family-finance/articles/what-is-a-qdro

https://www.thebalance.com/what-s-a-qdro-2894206