Equitable Division of Retirement Plans in DuPage and Kane Counties 

 Posted on September 29,2022 in Division of Property

Illinois law affirms that retirement accounts classified as marital property are subject to equitable property division during divorce. A Qualified Domestic Relations Order (QDRO) is a court order that obligates the contributing party to pay the alternate payee or dependent a portion of their retirement account. A divorce attorney proficient in the complexities of complex property divisions can prepare a fair and straightforward divorce settlement that adequately addresses retirement benefits.

Qualified Domestic Relations Order (QDRO) in Divorce

Included in a divorce decree, the legally-binding QDRO specifies the division and disbursement of retirement accounts. A QDRO can incorporate assets from more than one retirement fund. Alternate payees have the option to roll over the assets into their own retirement accounts. They can elect a lump sum, but those funds are typically taxable. Alternate payees also have the option to choose future installments, allowing them to control the investments of their shares.

QDROs are essential for the division of employer-based retirement plans, such as 403(b)s and 401(k)s. They must adhere to the Employee Retirement Income Security Act (ERISA) guidelines. Traditional and Roth Individual Retirement Accounts (IRAs) are not included in QDROs. Instead, IRAs are divided through a process called "transfer incident to divorce," which occurs once the divorce is complete.

Division of Retirement Plans and Social Security

Social security benefits – A former spouse is eligible to file for social security benefits on their contributing ex-spouse’s work record as long as the petitioner is at least 62 years old and presently unmarried. The petitioner must also have been married to the ex-spouse for at least ten years. Another condition specifies that the petitioner is not entitled to disability benefits or a retirement that exceeds the ex-spouse’s social security.

Retirement plans – Every retirement plan has a plan administrator who handles the funds. A plan administrator can calculate the amount the alternate payee is authorized to collect. The length of the marriage and the duration of the contributing spouse’s retirement account help determine how much is owed to the beneficiary. The numerous types of retirement accounts are classified into the following two.

1. Defined benefits – The Bureau of Labor Statistics affirms that 15 percent of private and 83 percent of public employees partake in a pension plan, a retirement fund that employees contribute to throughout their careers. Once retired, employees are paid either a lump sum or a fixed sum, which is disbursed recurrently.

2. Defined Contribution – Roth IRAs, traditional IRAs, and 401(k) plans comprise various investments. These retirement plans have compelling tax advantages. Employers sometimes match the 401k accounts or offer vested benefits, which may include company stock options.

Contact a DuPage County Divorce Attorney

At The Law Office of Matthew M. Williams, P.C., experienced divorce attorney Matthew M. Williams understands the complexities of QDRO and the division of retirement plans during a divorce. Certified in both collaborative and cooperative law, Matthew M. Williams has handled over 1,000 divorce cases. Results-oriented lawyer Matthew M. Williams advocates for fair and favorable solutions. If you are concerned about the equitable division of retirement plans, contact a Batavia divorce lawyer at 630-409-8184.

Sources:

https://www.investopedia.com/articles/retirement/03/060403.asp

https://www.investopedia.com/personal-finance/whats-qdro/

https://finance.yahoo.com/news/apply-ex-spouses-social-security-130025367.html

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

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