Division of Retirement Accounts
One of the property division issues that may arise in a divorce is the division of retirement account assets, including a 401K or other retirement accounts. Division of retirement accounts can be a hot-button issue for some couples.
Since retirement accounts are earned through the hard work of an individual, it can be difficult for some husbands and wives to part with a share of their retirement account assets at the time of a divorce. However, the law of retirement account asset division is fairly clear.
Retirement Accounts Are Often Marital Assets
Although retirement accounts may seem uniquely personal, Illinois law does not treat them differently when marital assets must be divided. As with other property, an Illinois judge presiding in a divorce case will determine if all or a part of the retirement accounts were acquired prior to marriage.
If the retirement accounts were acquired during marriage, they will be just as any other marital asset. If the retirement assets were acquired prior to marriage, the pre-marital retirement account assets are not marital assets.
Any part of the retirement account assets that are deemed marital assets will be subject to "just distribution" by the court, just as with all other marital assets.
Avoiding Tax Penalties Through QDROs And QILDROs
When a husband or wife take money out of their retirement account prior to retirement age, they may be subject to an early withdrawal penalty. To avoid tax penalties, a Qualified Domestic Relations Order (QDRO) may be created. When a judge issues a QDRO, the retirement plan administrator is ordered to create what amounts to a separate account or share for the recipient spouse.
While a QDRO is used for private employees, a QILDRO (Qualified Illinois Domestic Relations Order) is used for Illinois state and municipal employees. We have experience in divorce cases where QDRO's and QILDRO's are used to divide retirement account assets. A QDRO or QILDRO may be used to divide property in an uncontested divorce or a contested divorce.
Contact Thomas W. Hunter P.C., For Help
If you getting a divorce and need experienced legal representation, contact the family law attorneys at the law firm of Hunter & Roth, P.C. We practice exclusively in divorce and family law. We serve clients throughout the northern and western suburbs of Chicago. To schedule a free consultation with a divorce lawyer at our Illinois law office, please contact us.