Four Steps for Dividing Retirement Assets in Divorce

 Posted on November 30, 2019 in Property Division

Retirement assets grow in importance as marital property the longer you are married. If you divorce after several years of marriage, they could be one of the most valuable properties you own. As with all marital properties, you must include your retirement benefits as part of your division of property, and figuring out how to do so will be one of the most complicated parts of the divorce process. In general, there are four steps to determining how you will divide your retirement benefits as part of your divorce agreement:

1. Valuing Your Benefits: To start, you need to know the current value of your retirement benefits. Retirement accounts are classified as defined contribution plans and defined benefit plans. It is easier to determine the value of a defined contribution plan because it is an individual account that you are paying into. With a defined benefit plan, your retirement benefits are part of a group account that will pay you based on a formula, and estimating its value is based on your life expectancy and the account's interest rates.
2. Identifying the Marital Portion: Once you know the value of your retirement benefits, you must determine how much of it counts as marital property. The amount that your retirement benefits increased in value during your marriage is the amount that is marital property. Increases can come from your contributions to the plan, interest accrued on your holdings, and investments made with the money. The cut-off date determines when you stop counting increases in value towards your marital property. In Illinois, the date that a couple separates is usually the cut-off date.
3. Dividing the Benefits: Because Illinois is an equitable division state, you do not have to divide your marital retirement benefits evenly between each other. When a divorce court determines whether the division of retirement benefits is equitable, they will consider the duration of the marriage and the economic resources of each spouse. You may be able to keep all of your retirement benefits in exchange for other marital properties, such as your home.
4. Transferring Benefits: With many retirement plans, people are entitled to benefits based on being an employee or member of an organization. In order to receive benefits that you would not otherwise be entitled to, you will need a court order to transfer a portion of these benefits. A Qualified Domestic Relations Order is for private retirement benefits, such as a business’ retirement plan. A Qualified Illinois Domestic Relations Order is for retirement benefits provided by the Illinois state government. A Military Retired Benefit Division Order is for anyone who receives retirement pay because of their military service.

Contact a Kane County Divorce Lawyer

Dividing retirement benefits as part of your divorce may take the combined efforts of your divorce lawyer and a financial professional, such as an actuary. A St. Charles, Illinois, divorce attorney at Goostree Law Group will determine how to include your retirement benefits as part of your divorce while still protecting them. Schedule a free consultation by calling 630-584-4800.

Source:

http://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm