Family Law Newsletters
Barrington personal injury attorney, Barrington divorce lawyer


Personalized Legal Services in
Barrington and Schaumburg, Illinois

Facebook Twitter YouTube LinkedIn
Divorce &
Family Law
Real Estate
Wills, Trusts
& Probate
General Civil

How to split retirement assets when getting divorced

On behalf of Joe Lucas at Lucas Law

Illinois couples who are getting divorced should understand how to protect precious retirement investments from unnecessary loss.

Married couples who live in Illinois that face the prospect of divorce have to wrestle with many challenging decisions. From issues pertaining to the care of minor children to whether or not to sell a family home and more, the level of complexity of divorces can be great.

It is common today to split retirement accounts when getting divorced which brings forth yet more factors to consider during such times. People who must split these assets should understand how to do this so as to preserve the maximum amount of their long-term savings. This can be especially important for people who divorce when they are close to or even at retirement ages.

A Forbes story outlined the growth in the number of divorces among people aged 50 years and older based upon information provided by the National Center for Family & Marriage Research. According to the statistics, such divorces doubled in number between 1990 and 2010.

Issues related to retirement account division during divorces

When retirement accounts are divided as part of a divorce property division settlement, the stipulated amount is dispersed to the appropriate receiving spouse. However, if that money is simply kept or the proper procedures are not followed, some rather expensive results can occur. Both the IRS and Illinois Revenue must clearly understand the nature of such transactions or taxpayers can receive high tax and bills and other penalties.

Long live the QDRO

Both Fox Business and the Tampa Bay Times indicate the importance of using the Qualified Domestic Relations Order as a way of making crystal clear that specific financial transactions are part of a divorce proceeding. This simple form can avoid the assessment of early withdrawal fees or taxes.

Reinvesting matters

Forbes reported on the story of a California spouse who opted to simply keep her share of a 401K disbursement after her divorce. Because she was not of retirement age and did not qualify for these funds in this manner, she is now saddled with a substantial tax deficit on her account. If the woman had instead chosen to reinvest the funds within the stipulated timeframe, such consequences would have been avoided.

Not all accounts are equal

Spouses are encouraged to consider every type of account individually. According to Forbes, opting to take money from a Roth IRA instead of another form of retirement fund may be more advantageous because of their funding with post-tax dollars. These choices can go a long way toward maximizing ultimate retirement assets.

Consult an attorney

Whether one, two or more retirement accounts are to be split during a divorce, it is important that people work with an attorney during this process. Without the right oversight and following of processes, significant financial losses can result.

Keywords: divorce, retirement, assets, gray divorce

Avvo Profile Lake County Bar Association Illinois State Bar Association Northwest Suburban Bar Association
Back to Top