Division of Employment and Retirement Benefits
In Illinois, the accumulated value of retirement assets acquired during a marriage is considered marital property to be dividing in a divorce. The major types of retirement benefits are defined benefit plans (pensions) and contribution plans (401(k)).
A pension plan is provided by an employer to an employee without the employee’s input or contribution. If the employee spouse wants to keep the entire pension, then the pension must be valued and usually requires hiring an actuary. In valuing a pension plan, an actuary will consider the value of the monthly pension payments, the percentage of the benefit that is marital property, and the percentage the non-employee spouse should be assigned. However, the easiest way to divide a pension is to have the pension divided at retirement by having the Court enter a Qualified Domestic Relations Order (or in some cases, a Qualified Illinois Domestic Relations Order.)
A Qualified Domestic Relations Order (QDRO) or a Qualified Illinois Domestic Relations Order is a Court order that allows a retirement plan to pay benefits to a particular payee. A Qualified Domestic Relations Order must be properly drafted to convey the terms of the divorce settlement or Judgment for Dissolution of Marriage and ensure that the retirement benefits are paid correctly.
A 401(k) plan has a defined value and can also be divided pursuant to a Qualified Domestic Relations Order. If there are multiple 401(k) plans, spouses will often keep their own and select one to divide in order to fairly distribute the value of the accounts.
Whether your retirement account is a pension, 401(k), IRA or Roth IRA, 403(b), or another retirement plan, if it, or a portion of it, is classified as a marital asset, it will be subject to division in a divorce. Consideration must also be given to the tax implications of early withdrawal from retirement assets. If you receive retirement assets in a divorce, in order to avoid a tax penalty, these assets can be transferred to another retirement account in your name if proper procedures (such as entering a Qualified Domestic Relations Order) to transfer the funds. Susan has experience in handling complex financial matters and will work with you so that you receive a fair share of the retirement assets in the property division. Susan will confidentially discuss your financial circumstances with you to formulate a strategy that will achieve your goals.
There are situations where one spouse wants to keep his of her 401(k) and offset it by giving the other spouse the marital residence. In those situations, in order for it to be a fair trade-off, the retirement asset (along with all other assets) must properly valued so that each spouse receives his and her fair share. Susan will listen to your financial objectives and advocate for them. Safeguarding the financial future of her clients is one of Susan’s top priorities.