Never Walk Away from Retirement During Divorce Asset Division

 Posted on September 26, 2024 in Divorce

In long and particularly contentious divorces, a spouse who is entitled to an equitable portion of the other spouse’s retirement may be so tired of the asset division arguments and so ready to have the divorce over and done that he or she may choose to walk away from a share of the retirement fund. This is virtually always a mistake. For most average couples, the marital home and the retirement accounts of either or both spouses are the most valuable assets.

It is important to think about the future and what your finances will look like down the road before you give up an important marital asset. Especially if you are in your 50s or 60s, you may not have as much time to work and build up your own retirement fund. If you have any questions regarding what your share of your spouse’s retirement fund may be, discuss the issue with your Wheaton, IL asset division lawyer from Mirabella, Kincaid, Frederick & Mirabella, LLC.  

What Types of Retirement Funds Are Considered for Division?

Dividing a retirement fund during a divorce can be stressful, not to mention confusing, and it can require a fair amount of planning. The types of retirement plans that are typically addressed during the asset division process include:

•  IRA

• 401(k)

• TSP (Thrift Savings Plan)

• 403(b)

• Other Pensions

Any funds added during the marriage are generally considered marital property. The state of Illinois is an equitable division state rather than a community property state, which means that marital assets are divided fairly but not necessarily equally. Retirement funds have added layers of difficulty; while the money contributed before the marriage is generally considered separate property, there is also the issue of how that money may have appreciated and how much of the appreciated portion is a marital asset.

How Will Retirement Funds Be Divided?

One question that must be answered is whether the present or future value of the fund will be used during division. There is no "one size fits all" answer to this question. In some cases, the present value may make more sense when dividing, while in others, the future value may need to be considered.

There may be penalties and taxes to think about during the division as well. While most people will use a QDRO (Qualified Domestic Relations Order) to divide private company pensions and 401(k)s, Illinois government employees with a retirement pension must use a QILDRO (Qualified Illinois Domestic Relations Order). If the retirement plan is from the military, a specific different type of Order is required.

How Will the Retirement Fund Be Divided?

First, it must be determined which portion of the retirement fund is marital and which is non-marital. Some couples will trade an asset of equal value for their portion of the retirement fund; i.e., if the fund is worth $50,000, the couple might agree that one spouse could keep an asset with a similar net value, while the other would keep the entire retirement account. Couples may also choose to split the account, adding the QDRO or other order to the final divorce decree. Once the QDRO is drafted, it must be approved by the retirement plan administrator. It is worth noting that future Social Security benefits are not subject to asset division in a divorce.

Contact a DuPage County Asset Division Lawyer

If you have questions about dividing a retirement account or other property division issues, it is important to speak to a knowledgeable Wheaton, IL, asset division attorney. MKFM Law serves family law clients at its offices in Kane County and DuPage County. Contact Mirabella, Kincaid, Frederick & Mirabella, LLC today at 630-665-7300 to schedule your initial attorney meeting.