When going through an Illinois divorce, your marital property, assets, and debts will be divided between you and your spouse in what is considered to be fair and reasonable under the state’s “equitable distribution” guideline. Among those marital assets are retirement benefits which are often among the most valuable of all assets, especially for older Americans such as those in the over-50 group.
The issue of the division of marital assets can already be a contentious one and made more so for those with retirement benefits in accounts such as 401(k)s and IRAs. These accounts are often structured in a complicated way and have other factors that can make it difficult when applying the equitable distribution rule. Because of this you should work with an attorney who is experienced in handling complex marital property division if this issue applies to you.
Contemplating divorce? Have another family law issue in Chicago? Call the Law Offices of Jonathan Merel, P.C. at (312) 487-2795 for dedicated legal representation.
Enter the Qualified Domestic Relations Order (QDRO)
When dividing marital assets, the division and distribution applies only to property that was accrued after the marriage began. Therefore, any portion of retirement benefits accrued to your plan prior to marriage are not subject to division. If you and your spouse agree on the division of marital property, you can submit your agreement to the court as part of your divorce settlement. However, if you do not agree, the court will decide for you based on what it believes to be fair. Then the court decision will become part of the divorce settlement and become legally binding.
This legal binding, however, will not generally apply in the case of retirement accounts because they are only paid to the plan member and no one else per their structure. This holds true despite a division of marital property under a divorce decree. Therefore, another further documentation is required under law to allocate rights to specific retirement account benefits for the spouse who is not a plan member. This is called the Qualified Domestic Relations Order or QDRO. This document and the situation it covers has been enacted into Illinois statute.
How a QDRO Works
The QDRO permits retirement account monies to be divided between the plan member and his or her spouse, who is designated as the “alternate payee.” This is done so that the funds can then be deposited into the alternate payee’s account and no penalties will accrue. The QDRO directs the retirement plan administrator as to the specifics of how this should be done after divorce. The plan administrator must comply according to state law.
Even though dividing retirement benefits in this way may sound complicated, it can provide tax benefits. Exploring your options on the matter of the division of marital property is recommended so that you have all of the pros and cons and understand the consequences.
Our Firm Provides Detailed Assistance
If you or your spouse have a retirement account that will be subject to the division and distribution of marital property in your divorce, you can get competent legal advice and guidance at the Law Offices of Jonathan Merel, P.C. Our attorneys have been named in Super Lawyers listings as well as Avvo Client Choice Award winners, Lawyers of Distinction, and we have earned an A+ rating by the Better Business Bureau. We offer focused, competent, and compassionate family law representation to clients all over the Chicago area.
Reach out to our firm at (312) 487-2795 for legal guidance today.