Dividing property in a divorce is never easy, particularly when it comes to complex financial assets, such as retirement benefits or a retirement account. This raises an important question: How do we divide retirement assets in a divorce? A special type of legal order known as a Qualified Domestic Relations Order (QDRO) offers a solution. In this article, our divorce lawyers provide an overview of QDROs and explain how they can be used to protect your financial interests.
Understanding the Basics of QDROs
A Qualified Domestic Relations Order is a tool that a divorcing couple can use to effectively and efficiently split up certain types of retirement assets. As described by the Internal Revenue Service (IRS), a QDRO is “a judgment, decree or order for a retirement plan” for the purposes of dividing marital assets or providing child or spousal support. The importance of a QDRO cannot be overstated. When divorcing couples in Illinois fail to get a proper Qualified Domestic Relations Order, they often face the following three problems:
They have a hard time dividing retirement assets fairly.
They are hit with early withdrawal penalties or fees.
They incur income taxes on retirement savings long before expected.
A QDRO is often the single most effective way to divide tax-advantaged retirement benefits in divorce proceedings. You and your spouse should consider a Qualified Domestic Relations Order if you have pension benefits, a 401(k) account, or any other type of employer-sponsored retirement savings plan.
A Customized QDRO Helps Couples Split Retirement Assets Fairly
A Qualified Domestic Relations Order is a complex legal document. In order to be valid and enforceable in Illinois, a QDRO should meet certain basic criteria. While many QDROs share commonalities, it is essential that your order is customized to suit the unique needs of your financial situation. Among other things, a QDRO should consider:
The total value of your retirement assets
The best way to maximize benefits and minimize costs
The larger property division agreement
Any spousal support and child support obligations
Retirement savings are among the most valuable assets that many couples have, and it is imperative that your retirement benefits are fully considered when reaching a divorce settlement.
Contact a Kane County Divorce Attorney Today
At Goostree Law Group, our attorneys have the skills and experience to help you protect your retirement assets. Do you have questions about QDROs? We are here to provide answers. Contact our dedicated St. Charles, IL divorce lawyers at 630-584-4800 for a free, strictly confidential consultation.