Retirement accounts can be among the most valuable pieces of marital property spouses possess. It is not uncommon for spouses to have much more money sitting in a 401(k) than they do in their regular bank account. Contributions made to a retirement account by either spouse during the course of a marriage are treated as marital property, just as each spouse’s earnings during the marriage are. Therefore, retirement accounts are subject to equitable division during divorce. However, splitting a retirement account is not always simple. If you know that you and your spouse will need to divide the funds in a retirement account as part of your divorce, it is important that you work with an experienced divorce attorney who can help guide you toward the best option for splitting the account.
What Are My Options for Dividing a Retirement Account?
The first step to dividing a retirement account – or any other property – is determining which portion is marital property. Any contributions one spouse may have made before marriage generally are not considered marital property, so it will need to be determined exactly how much was contributed during the marriage. From there, you may have multiple options for how exactly to split the funds, including:
-
Buy-out – One spouse can buy out the other spouse’s interest in the retirement account. This often takes the form of a one-time payment, in exchange for which the spouse not holding the account waives their interest.
-
Property exchange – Spouses may also avoid the need to divide the account by negotiating for the spouse who does not hold the account to keep other marital property in exchange for waiving their interest in the retirement funds. For example, spouses may agree that one will keep the marital home, or a jointly owned luxury vehicle, but give up their share of the retirement account.
-
Two accounts – Another option is splitting a 401(k) or comparable account into two separate accounts. This can be helpful for those who wish to continue saving for retirement – and you will not have to worry about penalties for early withdrawal.
-
Cashing out – One spouse can cash out their share of the retirement plan, but this often leads to steep financial penalties. If one spouse has an urgent need to access these funds, this may sometimes be the best way to go about it. However, if you are in this situation you may want to speak with your attorney about whether alimony is an option for you.
However you and your spouse divide your retirement account in the end, our law firm’s goal is to make sure that the chosen method is in your best interest.
Contact a DuPage County Divorce Lawyer
Botti Marinaccio, LTD. is skilled at dividing retirement accounts between divorcing spouses. Our Hinsdale divorce attorneys will fight to make sure that you receive the full portion of any retirement savings you deserve. Contact us at 630-575-8585 for a confidential consultation to learn how we can help you.
Source: https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm