Will My Retirement Savings Be Divided in My Illinois Divorce?

 Posted on December 02, 2020 in Property Division

If you are getting a divorce, especially in your later years, one of your biggest concerns is likely how it will affect your financial situation. Specifically, you may wonder what will happen to your retirement savings and whether you will still be able to retire as planned. In order to prepare for the impact of your divorce on your retirement, it is important to understand both Illinois property division law and the tax implications of different retirement accounts.

How Are Assets Divided in an Illinois Divorce?

Under Illinois law, all marital property is to be divided equitably between spouses as part of a divorce resolution. This does not mean that the division has to be exactly equal, but it should be fair to both parties and prevent either from facing undue hardship. In some cases, the details of the division of property are left to the court’s decision, but divorcing couples also have the opportunity to reach an agreement of their own and submit it to the court for approval.

With this in mind, the answers to two questions can help you determine whether your retirement assets will be divided:

1. Are your retirement assets considered marital property? In most cases, retirement assets accumulated by either spouse during the marriage are considered marital property, meaning that they are subject to division in a divorce. However, contributions made before your marriage may remain non-marital property, and the same may be true for contributions made from a gift or inheritance in your name alone. Additionally, if you have a prenuptial or postnuptial agreement that addresses the ownership of retirement assets, this will be considered during the divorce process.
2. Can you reach a reasonable agreement with your spouse? Even if your retirement savings are considered marital property under Illinois law, you may be able to reach an agreement on the division of property that allows you to retain a good portion of them if you can successfully negotiate with your spouse. For example, if you each have separate retirement accounts in your own names, it may make sense for each of you to retain them. You also may be able to negotiate for a larger share of your retirement savings if you are willing to give up other assets, like the marital home.

If you do need to divide a retirement account, you should be sure to do so in a way that protects your assets from tax penalties. For example, transfers from one spouse’s IRA to the other’s may require approval for a transfer incident to divorce, and division of a 401(k), pension, or other employer-sponsored account will likely require a Qualified Domestic Relations Order (QDRO).

Contact a DuPage County Property Division Attorney

At the Davi Law Group, we understand the importance of protecting your assets during the divorce process. We can advise you on the likely impact of your divorce on your retirement savings and recommend specific strategies that meet your personal needs. Contact a Wheaton divorce lawyer today at 630-657-5052 to schedule a free consultation.

Sources:

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.ht

https://www.investopedia.com/articles/retirement/03/060403.asp