Division of Retirement Benefits during a Divorce

 Posted on April 13, 2015 in Property Division

Of all the tricky issues to sort out during a divorce, the equitable division of retirement benefits is among the most complicated. Because you have spent years working to earn your pension, fill your retirement fund, and otherwise prepare for your future, splitting these funds requires great care, and a considerable amount of technical know-how.

One good starting point, however, is knowing that only funds that were added to these accounts during the course of your marriage will be eligible for division between you and your spouse. Any money that you contributed to 401(k)s, pension plans, annuities, IRAs, or other types of retirement funds before your marriage will be yours, and yours alone after your divorce.

The Process of Dividing Your Benefits Fairly

Illinois courts prefer for you to decide on the details of how you will divide your marital property. You are encouraged to spell out the terms of your decision in a marital settlement agreement. A judge will review the agreement and approve it if it is fair. These terms will become part of the judge’s order of dissolution of marriage, finalizing the divorce.

In order to decide on what a fair division of retirement benefits under Illinois law would look like, the advice of a divorce lawyer is crucial. It is relatively easy to determine how much each spouse should get from a defined contribution plan like a 401(k), but complex formulas must be applied to less straightforward accounts such as pension plans and annuities.

In order to actually divide the funds, you will need to have a qualified domestic relations order (QRDO) built into your marriage settlement agreement. A QRDO will direct the administrators of the benefits fund as to how they should disburse the funds in the account. Some types of retirement funds allow spouses to withdraw their share of benefits as soon as the divorce is finalized, instead of waiting until the spouse who holds the account retires. However, there is usually a penalty associated with cashing out early.

Ways around Dividing Benefits

Because it can be such a nuisance to work out the complicated amounts payable to each spouse from retirement funds accrued during a marriage, many couples opt to exchange other marital property instead of dividing their benefits. For example, shares in real property can be exchanged in place of the amount of benefits that one spouse might be required to transfer to the other spouse.

For help understanding your potential obligations under Illinois’ division of marital assets law, seek the advice of an experienced DuPage County divorce lawyer now. The team at Davi Law Group, LLC can guide you through this complicated process, and can move your divorce forward past this often contested issue. Get in touch with our office today to schedule your consultation on dividing your retirement benefits.