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How Will Retirement Benefits or Pensions Be Handled in My Divorce?

Posted on in Property Division

joliet property division lawyerMany financial issues will need to be settled during a divorce case, and determining how to divide marital assets and debts will often be one of the primary concerns that spouses will need to address. In some cases, the property division process may be fairly straightforward, but it can become more complex when a couple owns multiple types of financial assets. Retirement benefits are one form of property that can complicate divorce proceedings, and spouses will want to understand their rights regarding these assets and the methods they can use to avoid financial penalties.

Dividing Retirement Assets

Spouses may save money in multiple types of retirement accounts, including employer-provided plans such as a 401(k) or an individual retirement account (IRA) that they have set up on their own. Even though these accounts may be in one spouse’s name, they will usually be considered marital assets if contributions were made to the account during a couple’s marriage. Fortunately, determining the value of these assets can be fairly simple, and the balance of an account may be divided between spouses during the divorce process.

Pension benefits that one spouse is eligible to receive will also be considered marital assets, as long as the spouse was married while working in the job where these benefits were earned. However, determining the value of these benefits is not always easy, especially if the spouse does not expect to retire until many years or decades in the future. The best way to deal with these assets is to agree that a certain percentage of the benefits will be paid to the person’s ex-spouse. Usually, this percentage will be based on the number of years the couple was married compared to the total number of years they worked in the pension-eligible position throughout their career.

For both retirement savings accounts and pension benefits, a couple will usually need to create a Qualified Domestic Relations Order (QDRO) when dividing these assets. This type of order is provided to the retirement plan administrator, instructing them to pay some of the benefits to the plan holder’s ex-spouse. For a 401(k) or another type of retirement account, a QDRO may specify a dollar amount or percentage that will be paid to an alternate payee, and when funds are transferred out of the account, no early withdrawal penalties or taxes will apply. For a pension, a QDRO will specify that a certain percentage of the benefits will be paid to the alternate payee.

Contact Our Plainfield Property Division Attorneys

If you need to address retirement accounts, pensions, or other complex assets when dividing your marital property, Reeder & Brown, P.C. will advise you of your rights, advocate for your financial interests, and make sure QDROs are created correctly. Contact our Joliet asset division lawyers by calling 815-768-4800 to arrange a free consultation.

Sources:

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2086&ChapterID=59&SeqStart=6000000&SeqEnd=8300000

http://www.pensionrights.org/publications/fact-sheet/i%E2%80%99m-getting-divorced-what-qualified-domestic-relations-order-and-why-should-

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/qdro-overview.pdf

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