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Your Right to Retirement Assets 

Goldstein Law Office  Feb. 26, 2024

Retirement assets are often one of the most valuable assets in a marriage. When a marriage ends, it's crucial to understand how these assets can be divided. Both spouses generally have a legal right to a portion of these assets, regardless of whose name is on the account. However, the exact division depends on various factors, such as the length of the marriage, the contributions made, and the laws of your particular state. 

Types of Retirement Assets 

There are several types of retirement assets, each with its own rules for division during a divorce. Here are some common ones: 

  • 401(k) Plans & Traditional IRAs: These are typically divided using a Qualified Domestic Relations Order (QDRO), which instructs the plan administrator on how to divide the assets. 

  • Roth IRAs: Unlike traditional IRAs, contributions to Roth IRAs are made after tax, meaning they might be subject to different division rules. 

  • Pensions: Pensions can be particularly complex to divide, especially if the pensioner hasn't retired yet. The division might involve a formula that takes into account the years of marriage during the pension accumulation period. 

Dealing with these requires a clear understanding of both the types of retirement plans involved and the laws governing asset division in your location. 

Division of Property in Illinois 

In Illinois, retirement assets are divided according to "equitable distribution," which does not necessarily mean a 50/50 split but rather what is fair and equitable.  

The state considers various factors when determining how to allocate marital property, including retirement assets. Such factors include the duration of the marriage, each spouse's financial circumstances, prior agreements such as prenuptial agreements, and contributions to the marital estate, whether monetary or in the form of domestic duties.  

Additionally, Illinois courts might consider the future earning potential of both parties. It is vital for divorcing couples in Illinois to accurately value their retirement assets and be aware that the court's decision on division aims to reach a just result rather than an equal one. 

Common Scenarios in Claiming Retirement Assets 

When it comes to claiming retirement assets, every situation is unique. However, there are some common scenarios that many people face: 

  • Long-term marriage with one primary earner: If one spouse has significantly more in retirement assets, the court may award a larger portion to the other spouse, especially if the marriage was long-term. 

  • Both spouses have substantial retirement assets: If both spouses have comparable retirement assets, they might each keep their own, depending on the specifics of the situation. 

  • Early withdrawal penalties: When dividing retirement assets, it's important to consider potential early withdrawal penalties and tax implications.  

  • Short-term marriage with disparate contributions: In marriages of shorter duration, the division may more closely reflect the individual contributions made, recognizing that both parties haven't had much time to commingle funds or to make equal contributions to retirement savings. 

  • Pre-existing retirement accounts: Retirement assets accrued before marriage are generally considered separate property. However, any increase in value during the marriage may be subject to division. 

  • Marriage with a stay-at-home spouse: In situations where one spouse has foregone career advancement and earnings to manage the home, Illinois courts may award a portion of the retirement assets to that spouse, recognizing their indirect contribution to the financial situation of the working spouse. 

  • Subsequent marriages: If one or both spouses were previously married, the division of retirement assets can become more difficult, especially when taking into account the rights of a former spouse under prior divorce settlements

Remember, it's not just about who has the right to what, but also about how to divide these assets in a way that makes financial sense for both parties. 

Understanding the Qualified Domestic Relations Order (QDRO)

A Qualified Domestic Relations Order (QDRO) is a legal order that occurs during a divorce proceeding and pertains to the division of retirement plan assets. It recognizes that both spouses have the right to a share of the benefits accrued in retirement plans during the marriage.  

A QDRO is a directive to the plan administrator on how to allocate these assets between the plan holder and the other spouse or dependents. This order is crucial because it ensures that the division is carried out in compliance with the plan's rules while also making certain that the distribution is eligible for the favorable tax treatment accorded to retirement benefits. Working with an experienced attorney is essential for drafting a QDRO to avoid unnecessary taxes and penalties and to safeguard the financial interests of both parties. 

Call Goldstein Law Office

If you're dealing with retirement asset division, don't go it alone. With my extensive experience in family law, I can help guide you through this complex process. I've seen enough cases to understand how people react in these scenarios, and I use that knowledge to create a detailed strategy for every client. If you're in Lake County, Cook County, or anywhere in between, don't hesitate to reach out to my office. You deserve to tell your side of the story, and I'm here to listen. Call Goldstein Law Office today. Let's secure your future together.

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