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In Illinois, marital property is broadly defined to include nearly all assets acquired by one or both spouses during their marriage. When a marriage ends in divorce, these assets must be considered in the equitable division of property. With this in mind, retirement accounts with contributions made during your marriage will almost certainly be a factor in your divorce, and this can be especially complicated if you are divorcing later in life after a marriage of many years. Understanding how retirement accounts are treated in an Illinois divorce can help you protect your financial security throughout the rest of your life.
One important thing to note is that while retirement contributions made during your marriage are likely considered marital property, contributions made before your marriage may still qualify as your own separate property. If you have kept these pre-marital contributions in a separate account or kept careful documentation of contribution dates, you will likely be able to protect some of your savings from the property division process. From there, you can determine how best to handle the remaining marital retirement assets.
Even in the case of marital retirement savings, it is not always necessary to divide each account. You may be able to reach an agreement with your spouse in which you each keep separate accounts with roughly equal values, or balance any disparities with other marital assets. However, if most of your retirement assets are held in one account in one spouse’s name, you will likely need to take the appropriate steps to divide it.
If you need to divide the assets in an IRA, you should be sure to specify the terms of the division in your divorce agreement and notify the account provider that you need to make a transfer due to divorce. Then, you should be able to rollover funds from one spouse’s account to the other. Keep in mind that the process may be slightly different depending on whether you have a traditional or Roth IRA.
If you need to divide a 401(k), a pension plan, or certain other types of employer-sponsored plans, the process can be more complicated. You will usually need to work with the employer or the plan provider to obtain a Qualified Domestic Relations Order (QDRO) to allow a transfer between spouses without issue. Otherwise, the transfer could be immediately taxed and subject to early withdrawal penalties.
No matter your income and economic status, protecting your retirement savings is an important priority during the divorce process. At the Law Office of Martoccio & Martoccio, we can help you understand your options, guide you through the process of dividing your accounts, and represent you throughout your pursuit of a fair settlement or divorce resolution. For a free consultation with a DuPage County divorce lawyer, contact us today at 630-920-8855.