You’ve worked long and hard for your retirement. Now you’re getting divorced, and wondering if you have to share it with your spouse. During an Illinois divorce, retirement accounts are commonly subject to division, but negotiation or certain exceptions could help protect your retirement. Even where it must be divided, having a knowledgeable attorney handle that aspect protects the value of your retirement and ensures you make divisions correctly.
At Kulerski & Cornelison, our team serves families DuPage and Cook counties. We know how to handle the division of retirement accounts for Illinois families.
How Illinois Law Classifies Retirement Accounts
Illinois follows the principle of equitable distribution. This means marital property is divided fairly, though not necessarily equally. Retirement accounts are often considered marital property, at least in part, depending on when contributions were made:
- Before Marriage: Contributions made prior to marriage are generally considered non-marital property.
- During Marriage: If the contribution is made during the time you were married, it will likely be considered marital property.
- Growth and Appreciation: Eve if you started your account before marriage, any increased value will likely be marital property.
Types of Retirement Accounts Commonly Divided
Illinois courts may divide a wide range of retirement assets, including:
- 401(k) plans
- 403(b) plans
- Traditional and Roth IRAs
- Pensions
- Deferred compensation plans
- Profit-sharing plans
Every account type has different rules for how it gets divided. Different forms or procedures can make this complicated, unless you have an attorney to assist you.
Division Through Qualified Domestic Relations Orders (QDROs)
Employer-sponsored plans are usually divided by a Qualified Domestic Relations Order (QDRO). This order tells the plan administrator to divide the account in accordance with a divorce decree. The QDRO:
- Ensures compliance with federal law under ERISA.
- Allows funds to be transferred without early withdrawal penalties.
- Specifies how benefits will be paid to the non-employee spouse.
Without a QDRO, splitting retirement accounts is often ineffective or done improperly. This can create financial penalties.
Negotiating Retirement Accounts in Divorce Settlements
Very often, you can negotiate a way to avoid dividing retirement accounts, or lessening the impact of any division.
Options may include:
- Offsetting Assets: The other spouse could get the same value they’re owed from retirement in another way, such as with other assets or cash payment.
- Splitting Accounts: You can negotiate how the retirement account is split.
- Trading Interests: A spouse might waive their rights to your retirement for other benefits, whether financial or because you have nearly equal retirement.
The right negotiation tactics could help spare you from dividing these assets or dealing with litigation of the issue.
Factors Courts Consider in Division
Illinois courts weigh several factors when deciding how to divide retirement accounts:
- Length of the marriage.
- Each spouse’s contributions to marital property.
- Economic circumstances of each spouse.
- Future earning potential.
- Retirement needs.
- Any prenuptial or postnuptial agreements.
Common Misconceptions About Retirement Accounts in Divorce
- “My retirement account is in my name, so it’s mine.”
Not necessarily—Illinois law looks at when contributions were made, not just whose name is on the account. - “We can split the account without a QDRO.”
For most employer-sponsored plans, a QDRO is required to avoid penalties and ensure compliance. - “The court will divide everything 50/50.”
Illinois uses equitable distribution, which means division is fair but not always equal.
Handle Your Retirement Assets the Right Way During an Illinois Divorce
Retirement accounts are often one of the primary issues in your Illinois divorce. There are ways to safeguard these accounts so they are divided correctly and legally. Negotiated resolution and proper evidence can help ensure each party receives an equitable share of the marital retirement value.
At Kulerski & Cornelison, our family law attorneys are ready to help. Contact us today for a consultation of your case.