Division of Retirement Accounts During Divorce in DuPage County

 Posted on July 21, 2022 in Divorce

Funds from a retirement account are often marital assets and subject to equitable marital complex property division. Each retirement account, including private, public, and military, vary in its distribution and division. Illinois law recognizes that retirement accounts have contributions that are either economic or non-economic. This law is especially essential for the non-contributing spouse, known as the alternate payee. Some retirement accounts may be worth more value in the future.

A Qualified Domestic Relations Order (QDRO) is a court order that recognizes retirement funds are marital property. A retirement account and QDRO attorney can help with this type of complex property division.

Two Types of Retirement Accounts

Retirement plans have a Plan Administrator who manages the funds for the beneficiaries and contributors. Although there are many kinds of retirement accounts, each can be categorized into the following two.

1. Defined benefits – A pension plan is a retirement fund that employees consistently contribute to throughout their working years to then be paid out during retirement years. A fixed sum is recurrently paid, or paid in a lump sum, to a retired employee whose pension falls under a defined benefit plan. According to the Bureau of Labor Statistics, 83 percent of public employees and about 15 percent of private employees partake in pension plans.

2. Defined Contribution – The individual accounts, Roth IRAs and traditional IRAs, hold various investments. The main difference between the two IRAs is when their tax advantages occur. Employee 401(k) plans also fall into this category. They work like a savings account with tax advantages. Oftentimes, employers offer vested benefits or will match the 401k accounts.

What is Qualified Domestic Relations Order (QDRO)?

As part of the divorce decree, a QDRO confirms that an alternate payee is eligible for portions of the contributing ex-spouse’s retirement fund. A QDRO can include assets from more than one retirement fund. The stipulations of a QDRO vary from plan to plan. Alternate payees can typically choose a lump sum or a portion of future payments, with the latter enabling control over the investment of funds in their shares. Usually, lump sums are not tax-exempt. Rolling over such funds into their own retirement accounts is also an option for alternate payees.

Contact a DuPage County Retirement Account and QDRO Lawyer

At Pesce Law Group P.C., our retirement account and QDRO attorneys are proficient in the complexities of the division of marital assets. As a full-service family law firm, we understand the many aspects of divorce matters. We are reliable and advocate for just solutions. For a free consultation, contact a Naperville retirement account and QDRO attorney at 630-352-2240.

Sources:

https://www.investopedia.com/terms/p/pensionplan.asp

https://www.investopedia.com/terms/t/traditionalira.asp

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/qdro-overview.pdf