Going through a divorce can be a highly emotional time for Illinois couples. Not only does ending a marriage affect the family, but it also can have a big impact on the finances of each party. In many cases, the process of dividing a couple’s marital property can cause the most conflict and contention. The change in financial standing often requires that spouses must change the lifestyle they have enjoyed for many years.
A spouse who has chosen to leave the workforce, either to raise children or assist the other spouse as he or she furthers career ambitions, may worry about where to secure a regular income. What some do not realize is that retirement accounts are part of the marital estate, making them available for a non-working spouse to claim in order to have some financial security in later years.
Retirement plans as marital property
Illinois law considers all property obtained by a couple throughout their marriage to be marital property and subject to property division. Almost anything that a couple acquires while married, aside from gifts or inheritances, are divided equitably by the courts during a divorce. This includes contributions to pension plans and retirement accounts made prior to filing for divorce. If a spouse began saving for retirement before marriage and continues working after the marriage is ended, then those contributions are not available for division.
Determining the value of a pension
In order to determine the exact amount that a spouse can claim from their ex’s retirement plan, a valuation of the plan is necessary. It is not always easy to place a monetary value on a pension plan and often requires the help of a financial professional. Once the marital portion of the plan is valued, the courts can determine how it will be split, or the spouses can decide to offset the difference by giving up a valuable asset instead.
Qualified domestic relations orders
A qualified domestic relations order (or QDRO) is the description provided by the court to the retirement plan administrator of how the funds should be divided. The QDRO outlines how the administrator is to pay the non-employee spouse upon the age of retirement. Some couples choose to distribute the funds in monthly installments, while others prefer to do it in one lump sum.
Claiming another spouse’s retirement plans can be one of the most complex aspects of the property division process, and many divorcing individuals choose to work with an attorney to ensure that division is done correctly.
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