When people are getting divorced in Illinois, their finances can take a nosedive if they have not adequately planned and are taking steps to minimize the impact of their relationship change on their long-term financial stability. Because money is an integral part of survival and even comfort for many people, their efforts to stabilize their finances as soon as possible could make a tremendous difference for their future.
Retirement accounts are one definite area of people’s finances that will require attention and modification during divorce proceedings. In the case of one divorcing couple, a settlement was reached where the wife was required to pay her former husband a portion of her retirement account. The man requested that the funds be deposited into a different IRA account he had set up elsewhere. Once this transaction was processed, the man withdrew the funds immediately.
As one can imagine, that decision resulted in a couple of different penalty fines and tax repercussions. This scenario highlights the importance of people taking adequate time to understand how splitting, sharing and utilizing retirement funds in a divorce situation could impact their finances. To avoid potential penalties and repercussions, people may consider negotiating a cash payment with their former spouse or they could establish a QDRO which provides a bit more stability during transferal of retirement funds.
People may also consider contacting an attorney to help them through the process of finalizing their divorce and managing their finances during that time. Legal professionals have the experience of working with many cases to be able to provide sound advice for divorcees.
Source: Forbes, “Divorce, Retirement Accounts & Taxes: The Importance Of Getting It Right,” Kelly Phillips Erb, Nov. 21, 2019