For older divorcees, the thought of divorce and retirement plans may send shivers down their spines. Retirement savings represent the couple’s long-term financial savings. However, divorce can instantly throw a wrench in those plans. Overall, Illinois law considers retirement savings to be part of the marital state. Thus, they are subject to division.
Typically, retirement accounts include IRAs, 401(k)s, and pensions. Initially, couples may establish these accounts through their respective employers. In some cases, spouses set up their retirement plans prior to the marriage. Conclusively, the impact of a divorce on retirement savings depends on whether Illinois law views them as marital property.
Determine Your Retirement Plan
When discussing divorce and retirement plans, different types of accounts contribute to unique outcomes. For example, some retirement plans yield cash immediately. On the other hand, other retirement plans provide for a stream of future income. Each has a different requirement about how the plan can be divided.
Organize plan documents to understand the specifics surrounding stocks, bonds, IRAs, pensions, and more. Full clarity can ensure an equitable division of plans containing marital assets.
Retirement Plans Falling Under Marital Property in a Divorce
Spouses need to determine when they set up their retirement accounts, before or during the marriage. Retirement plans established during the marriage with marital funds likely fall under the marital estate. However, accounts set up prior to the marriage may still be considered part of the marital estate.
For example, if a spouse created an account before the marriage, then during the course of the marriage, continued contributing to the account, then what percentage is considered non-marital property and what portion is considered marital property needs to be determined.
Ending the Divorce & Retirement Plans Conversation with a QDRO or QILDRO
The final court order of dissolution of the marriage may not necessarily end the story of divorce and retirement plans. In the state of Illinois, financial retirement plans mandate a separate Qualified Domestic Relations Order (QDRO). Alternatively, a judge issues a Qualified Illinois Domestic Relations Order (QILDRO) if required for a specific retirement plan.
QDRO’s and QILDRO’s involve a special court order, granting one spouse the right to be paid a portion of the other’s retirement benefit earned from an employer-sponsored retirement plan during the marriage. Without a QDRO and QILDRO, the spouse won’t collect benefits from the plan. This holds true, even if the settlement agreement provides for a benefits payout and the court accepted that agreement.
Exploring Divorce & Retirement Plans with Bruckner Hernandez Legal Solutions
In the challenging divorce process, retirement plans tend to cause concern and anxiety for many. However, people who understand their retirement accounts tend to relieve much of the uncertainty.
For help dividing retirement plans during a divorce, contact the family law firm at Bruckner Hernandez Legal Solutions, LLC.