How Are Retirement Plans Divided in an Illinois Divorce?

 Posted on July 31, 2019 in Divorce

Many people work for a long time in order to save for retirement. Others may have a pension, or they may invest in mutual funds or IRAs so they can live comfortably after they are done working. If a married couple decides to part ways, they may wonder what will happen to their assets in a divorce, including their retirement plans. Under Illinois law, marital assets are divided using “equitable distribution.” This means any assets acquired during the marriage will be divided fairly between the spouses, but not necessarily split in half. It is important to understand what you are legally entitled to in terms of retirement savings that may have originally been meant for both your and your spouse’s future.   

Dividing Retirement Accounts and Pensions

If retirement accounts were created or contributed to during a couple’s marriage, or if they increased in value during the marriage, they are considered to be marital property. The balances in these accounts may be divided equally between the spouses, or a couple may agree on another way to divide these assets. Once it is determined how any retirement accounts will be divided, the retirement plan administrator must be given the details of the division and how that division will be executed. This is done through a Qualified Domestic Relations Order (QDRO). 
By using a QDRO, funds can be withdrawn or transferred from a retirement account, and the account owner will not be required to pay penalties or taxes on the withdrawn amount. QDROs are typically entered once the divorce is finalized. The majority of retirement accounts, including 401(k)s, require a QDRO before they can be divided between spouses. IRAs are considered a different type of retirement savings and do not require a QDRO. 

Retirement plans under the Illinois Pension Code require a different procedure that uses a Qualified Illinois Domestic Relations Order (QILDRO). This is because pension benefits may not be available at the time of the divorce, and they will only be paid after a spouse retires. The other spouse will be entitled to receive a percentage of these benefits based on the number of years they were married while the spouse contributed to the pension plan. A QILDRO will instruct the pension plan administrator to pay a percentage of the spouse’s pension benefits to the other spouse when the spouse begins receiving these benefits. A QILDRO will not affect how the benefits accrue or any of the vesting requirements.

Contact a Cook County Division of Marital Assets Attorney

Saving for retirement is an important aspect of your life that can significantly affect your future plans. If you are getting a divorce, you may be worried about how retirement plans or investments will be split between you and your spouse. The experienced attorneys of Wakenight and Associates, P.C. have handled many complex divorce cases that involved significant financial issues. Our diligent Oak Park divorce lawyers can help you navigate your new financial landscape and ensure you receive a fair settlement. To schedule a free consultation, call 708-848-3159 today. 

Sources: http://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2086&SeqStart=5300000&SeqEnd=6100000

https://www.srs.illinois.gov/SERS/qildroforms_sers.htm