How Are Retirement Accounts Divided in Illinois Divorces?

Retirement accounts are divided equitably in Illinois divorces, often requiring a Qualified Domestic Relations Order (QDRO) for proper distribution.

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Understanding Retirement Account Division in Illinois

Retirement accounts, such as 401(k)s, pensions, and IRAs, are considered marital property if contributions were made during the marriage. Illinois courts use equitable distribution to divide these accounts fairly, though not always equally. The process involves valuing the accounts and determining the appropriate share for each spouse.

Legal Context for Dividing Retirement Accounts

Under the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5), retirement accounts accrued during the marriage are marital property, regardless of whose name the account is in.

Key Considerations:

  1. Marital vs. Non-Marital Contributions:
    • Contributions made before the marriage are typically classified as non-marital property and remain with the account holder.
  2. Valuation of Accounts:
    • The court assesses the current value of the accounts to determine the marital portion.
  3. Use of a QDRO:
    • For employer-sponsored plans like 401(k)s or pensions, a Qualified Domestic Relations Order (QDRO) is required to divide the accounts without tax penalties or early withdrawal fees.

Example Scenario:
If a spouse’s 401(k) grew by $100,000 during the marriage, the court may award half of that amount ($50,000) to the other spouse, facilitated through a QDRO.

Steps to Divide Retirement Accounts During Divorce

  1. Identify All Retirement Accounts:
    Compile a list of all accounts, including 401(k)s, IRAs, pensions, and other retirement funds.
  2. Determine Marital vs. Non-Marital Portions:
    Work with financial professionals to separate pre-marital contributions from those made during the marriage.
  3. Value the Accounts:
    Obtain current statements to determine the value of the marital portion of each account.
  4. Draft a QDRO (if necessary):
    Have a QDRO prepared and submitted to the court for approval, ensuring compliance with plan requirements.
  5. Execute the Division:
    Once approved, the QDRO is sent to the plan administrator to transfer the designated share to the receiving spouse.

How Attorneys Can Help

An experienced family law attorney can:

  • Help identify and classify retirement accounts as marital or non-marital property.
  • Collaborate with financial professionals to value the accounts accurately.
  • Draft and file QDROs or other necessary documentation.
  • Advocate for a fair division of retirement assets based on your financial needs.

Need Help Dividing Retirement Accounts?

Call (630) 366-1760 to consult with a family law attorney. We’ll guide you through the division of retirement accounts and ensure your financial interests are protected.

Disclaimer: This page provides general information and is not intended as legal advice. For personalized assistance, consult a licensed attorney.