Dividing Retirement Plans in an Illinois Divorce

 Posted on January 15, 2018 in Division of Property

During an Illinois divorce, the division of marital property is very often complex and divisive. One asset that can spark significant debate is each spouse’s retirement account or accounts, simply because the process to divide such an account can be laborious, and each spouse wants to ensure that division is fair and above board. Having an understanding of how a retirement account is divided can go a long way toward quelling arguments before they start.

QDROs

With most private retirement accounts, the proceeds are normally only payable to the listed beneficiary - at times, the employee who earned it; at times, the spouse, at times, someone else. The Employee Retirement Income Security Act (ERISA) covers 401(k)s and mandates that only one’s spouse may be the beneficiary, although Individual Retirement Accounts (IRAs) are not covered by ERISA.

Regardless, if your spouse is listed as the beneficiary on your retirement account, or if your retirement account is held to be marital property, it must be divided, like any other asset acquired during your time together. In some cases, it is possible to divide only those contributions made after the marriage began, as money contributed before the marriage is considered separate property.

In order to divide retirement accounts, a Qualified Domestic Relations Order (QDRO) must be executed and submitted to your plan administrator. A QDRO sets out the relevant information about why the account in question is being divided (divorce) and the identifiers for the other party who will receive funds. It must be approved by a judge before any alteration in disbursement can begin, and this will usually happen once your divorce decree is entered into the record and your proceedings end.

Current Value Matters

While a QDRO is the method by which a retirement account can be divided, it does not offer guidance on percentages or appropriate amounts. A QDRO is a document with which a private pension plan must comply by law in terms of disbursement, but that is as far as the plan’s obligation goes. Perhaps the single most important thing to keep in mind when discussing retirement instruments is that in this day and age, many accounts will be diversified, especially into the stock market. This means that the value may fluctuate on any given day, which can make your job harder in terms of determining what is fair.

If you or your spouse’s retirement plan is in stocks or stock options, the only real step you can take is to assess the account at its current value as of your proceedings. This can sometimes make people gun shy about assigning a value at all, simply because stocks rise and fall, but there will never be a more equitable point to use as a division unless somehow the administrator can be convinced to sell all relevant stocks and options - which would be manifestly unwise in most situations.

Enlist a Knowledgeable Attorney

Divorce is difficult enough in many respects without uncertainty surrounding asset division, especially when it concerns the money with which you plan to retire. If you have any questions regarding retirement plan division, Kathryn L. Harry & Associates, P.C. may be able to assist. Contact our passionate DuPage County asset division attorneys to schedule an appointment; we will be glad to assist you.

Source:

https://www.dol.gov/general/topic/retirement/typesofplans