Property division is often one of the most complex aspects of divorce. The division of retirement plans can be especially complicated. If you are getting divorced, you may have concerns about how your or your spouse’s IRA, 401(k), pension plan, or other retirement benefits will be divided. In Illinois, marital property is divided according to “equitable distribution.” Non-marital property, or property which was obtained by either spouse before the marriage, is not eligible for division. The specifics of how your retirement plan will be handled during divorce will vary depending on your unique circumstances, so it is important to contact an attorney and discuss your legal options.
Is My Retirement Plan Part of the Marital Estate?
Property accumulated during a marriage is typically considered part of the marital estate. Only certain gifts and inheritances are exempt from this rule. So, if you earned retirement funds through work that occurred during the marriage, these funds are marital property. If you started contributing to a retirement plan before you got married and then continued to make contributions during the marriage, part of the retirement plan may be considered marital property, and part of the plan may be considered non-marital property. However, retirement plans excluded from the marital estate through a valid prenuptial or postnuptial agreement are not eligible for division.
There are several options available for dividing these funds during the property distribution process. One option is for the retirement funds and benefits to be divided between the spouses through a Qualified Domestic Relations Order (QDRO). Another option is for one spouse to keep the retirement funds while the other spouse receives marital assets which are of approximately equal value.
What Is a Qualified Domestic Relations Order (QDRO)
A QDRO is a court order that dictates how a retirement account or pension will be divided after divorce, and it instructs the retirement plan administrator to carry out the division. Most retirement accounts require a QDRO if the funds and benefits are going to be divided between divorced spouses, and it will allow funds to be distributed without incurring taxes or early withdrawal penalties. However, an IRA may not require a QDRO. If you have a retirement plan managed by the Illinois Pension Code, you will need a Qualified Illinois Domestic Relations Order (QILDRO). A QDRO may instruct the plan administrator to disburse a spouse’s portion of the retirement account immediately, or it may instruct the plan administrator to distribute each spouse’s share of the benefits upon retirement.
Contact a Wheaton Property Division Lawyer
If you are planning to divorce, and you or your spouse have a 401(k), IRA, or pension, you may wonder how these funds will be handled during divorce. The Stogsdill Law Firm, P.C. has substantial experience assisting divorcing clients with retirement concerns. Call our office today at 630-462-9500 and schedule a confidential consultation with one of our knowledgeable DuPage County divorce attorneys to discuss your options.