When most people think about the division of assets in their divorce, they may overlook one important asset – their retirement accounts. Retirement accounts held by either spouse are divisible in a divorce, depending on when the money or benefits in the accounts were accumulated. There are different considerations in the division of retirement assets, and various legal forms that have to be filed with the employer or entity which holds the account.
Retirement benefits to be divided in a divorce are those that were earned during the marriage. Any of the retirement benefits a person acquired before the marriage are not included in the division because they are not marital assets. Retirement benefits are divisible as marital assets even though they aren’t vested, and even if the employee did not make any contributions outside of the employer contributions to the plan.
If divorcing spouses can agree to an offset, they can come to different agreements as to how the value of the retirement assets will be allocated. For example, one spouse can agree to take a different property or a sum of money from the other spouse in lieu of the retirement option. In addition, the spouses can agree that each will keep his own retirement accounts and not divide the accounts. Spouses can put the agreement in a marital settlement agreement and present it to the court for approval.
Spouses who will divide retirement assets are required to have a special order known as a qualified domestic relations order (QDRO) in order to compel the plan administrator to make payments to someone other than the person who earned the benefits. Without a valid QDRO, benefits cannot be paid. In Illinois, some retirement plans for government employees require a different order known as a Qualified Illinois Domestic Relations order (QILDRO) in order to pay out retirement benefits as part of a divorce.
Retirement benefits do not have to be paid out when a spouse retires. The spouse who is getting a portion of the retirement benefits per the divorce can choose to take the benefit before the other spouse retires, and depending on the age of the spouse who owns the retirement account, may have to pay a penalty to take the benefits out. Alternatively, a spouse can take the retirement benefits and roll them into an eligible retirement plan and avoid the penalty.
Contact an Experienced Divorce Attorney for More Information
If you are going through a divorce, the issue of the division of marital assets is likely to come up as you discuss your options with your attorney. You should make sure you understand your rights to your spouse’s retirement assets, and how much of the retirement account marital assets constitute. For more information and a consultation with a passionate Naperville divorce attorney, contact Roscich & Martel Law Firm, LLC for a consultation.