Chicago Retirement Account Divorce Lawyers
When dividing up assets during a divorce, it is important to consider future assets, such as retirement plans. Retirement plans have value, and there are cases in which a spouse who did not work should receive support from his or her spouse's retirement plan. In many divorces, retirement savings, such as IRAs or 401(k) accounts, are significant assets; in fact, retirement assets are often the most valuable assets that a couple possesses.
The Chicago divorce attorneys at Nottage and Ward, LLP, understand the financial issues that arise during the divorce process. If you're going through a divorce and would like to receive your fair share of retirement benefits acquired during your marriage, make sure your rights are fully protected. Call us at (312) 332-2915 to find out how we can help you.
When evaluating a retirement plan during a divorce, a Chicago family law court will consider the type of plan, the changes in value to the plan during the marriage, and contributions made to the plan during marriage. Specific contractual terms, the age of the employee, the potential retirement date, and the years of employment before and during marriage will be considered as well. All benefits earned during a marriage are marital assets and must be divided. Benefits earned before marriage or after the date of dissolution are characterized as non-marital property and are not subject to division; the spouse to whom the assets belong will retain his/her non-marital portion.
It is common for a divorce to result in the need to allocate a defined benefit plan. In such cases, one spouse may receive monthly payments that start at a certain age. A defined benefit plan is often called a pension. This type of account guarantees the holder a specific amount of money upon retirement. The sum can typically be paid out either on a periodic basis or, in some cases, in one lump sum. In such cases, the former spouse may be entitled to a portion of the retirement value earned during the marriage. That spouse will not, however, be allocated any of the value of the retirement account that is added after the divorce, or that was earned prior to the marriage.
Retirement plans come in many shapes and sizes. The types of plans evaluated in a divorce include:
- Roth IRA
- Simple IRA
- Payroll Deduction IRA
- Profit-Sharing Plan
- Defined Benefit Plan
- Money Purchase Plan
- Governmental Retirement Plan
- Military Retirement Plans (BRS, Legacy High-3)
- 457 Plans
- Multiple Employer Plans
A retirement account HSA often amasses a significant value and may be one of the most valuable assets of a marriage. Dividing retirement accounts is often a complex calculation, as only the amount paid into the retirement account during the duration of the marriage are considered marital property. After the marital portion of the retirement account is valued, it can be divided with several approaches:
- Buy out: The owner of the retirement account may “buy out” the other spouse by forgoing some of the other marital assets, allowing the owner of the account to retain it.
- Split: The marital asset portion of the retirement account may be split between the two spouses. This is a more complex method, requiring a court order called a “Qualified Domestic Relations Order.”
Under Illinois state law, the pension benefits accumulated over the duration of the marriage are considered marital property. To divide these assets, a court order called a “QDRO” will divide the retirement plan between the two spouses. Without a QDRO, the tax consequences can be significant.
The favorable tax benefits of a retirement account can be preserved with a QDRO, as most retirement accounts are tax-deferred. The tax consequences occur when money is withdrawn before reaching retirement age. With a QDRO, the recipient of some portion of a retirement plan can avoid the penalties for early withdrawal among other tax benefits.
A QDRO must be requested and approved by the court. It is imperative that you have the assistance of an attorney to file the necessary forms, and to create a custom QDRO that matches your specific circumstances. Correctly following the process could protect you from significant financial losses.
There are many important factors to consider when filing for divorce. If you are about to file for divorce, or if your spouse has already filed for divorce, make sure you reach out to an experienced divorce lawyer who will review your financial situation and help you get the support you need.
The Chicago family law lawyers at Nottage and Ward, LLP, can help you protect your assets, including your future earnings. Contact us at (312) 332-2915 for an initial consultation and case evaluation.
- The Affect of Divorce on Retirement Planning and Social Security Claims
- The Financial Impact of a Divorce
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