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One of the most difficult aspects of many divorce cases, particularly those that involve a long marriage, is the division of retirement accounts. Dividing these savings follows the same property division rules of the state. These accounts are divided fairly, although not necessarily equally. Dividing retirement savings in a divorce also follows a slightly different procedure and has additional rules. When a divorce involves the division of retirement accounts, it is always best to work with an Illinois divorce lawyer that can help you through the process.
Marital property includes any assets the couple obtained together during the marriage, while separate property refers to assets a person acquired prior to the wedding. Although this concept in property division matters seems quite simple, it is not and has the potential to become quite complex, particularly when retirement accounts are involved.
Even if a person had a retirement account prior to the marriage, it is likely that some of the marital assets contributed to those investments. A lawyer must determine which percentage of the savings are separate property, and which are considered marital property.
When dividing retirement accounts, couples must fill out a Qualified Domestic Relations Order, or QDRO. Again, while this process sounds like simply filling out a form, it is much more complex than that. Creating a QDRO is a highly detailed process and once it is done, the plan administrator must approve it before moving forward.
The transfer of retirement funds can occur in a number of ways. The spouse receiving a portion of the account may choose to roll it over into their own IRA. If they do this, the funds are not considered taxable. If the receiving spouse chooses to receive all or a portion of the money as part of the divorce, they are required to claim it as income on their tax return, but they do not incur the standard ten percent penalty.
Just as there are several ways a retirement account may be divided, there are also different ways to determine how much one spouse should receive. It is always best to divide these savings based on a percentage rather than a fixed dollar amount. Property distribution takes time and it is important to consider the possibility of fluctuating markets.
For example, Spouse A has $100,000 in retirement savings, and Spouse B is entitled to 50 percent. If the amount is expressed at $50,000, Spouse B will receive no more and no less than that amount. However, if the amount is expressed as a percentage, Spouse B will receive 50 percent of whatever the funds are worth at the time.
There are many issues to consider when dividing retirement accounts, and it is important to get it right so you do not relinquish too much, or so that you can ensure you receive what is rightfully yours. If your divorce case involves the division of retirement assets or any other complex issue, our dedicated Hinsdale family lawyers at the Law Office of Martoccio & Martoccio can help. Call us today at 630-920-8855 or contact us online to schedule a free consultation.