Schaumburg Division of Retirement Accounts and Pensions Attorney

Attorney Helping Clients Navigate the Division of Retirement Accounts and Pensions in Schaumburg

Divorce is often described as one of life's most stressful experiences, and navigating the division of marital assets can dramatically add to that stress. In Illinois, as in many other states, retirement accounts and pensions may be considered marital property, and they may be subject to division between divorcing spouses. But how exactly are these complex assets divided? Schedule a consultation with an experienced attorney at Anderson Attorneys, P.C. to learn how you can navigate this complex process successfully.

Why Retirement Accounts Are Different

Retirement accounts and pensions are complex, primarily because they are often a mix of marital and separate property. Any contributions made during the marriage are usually deemed marital property, whereas those made before the marriage are considered separate property. Tracing these contributions can be challenging, especially if multiple accounts or employers are involved.

Differing types of retirement plans add another layer of complexity. Defined benefit plans like traditional pensions and defined contribution plans like 401(k)s and IRAs have different rules and valuation methods. Missteps in dividing these assets can lead to significant financial losses for one or both parties.

What Is a Qualified Domestic Relations Order (QDRO)?

A Qualified Domestic Relations Order, or QDRO, is a court order that is typically issued subsequent to a divorce that will allow for the division of a retirement account or pension, ensuring that a person's spouse will receive their share of this asset. The QDRO acknowledges the right of an "alternate payee" (a spouse or ex-spouse) to receive some of the benefits provided under a retirement plan, including funds saved in a retirement account or payments made through a pension.

A distinct advantage of a QDRO is that it allows for the division of retirement plan assets without triggering a taxable event. In the absence of a QDRO, any payout to a spouse would usually be considered a taxable distribution. For retirement accounts, this can prevent penalties that would apply if the distribution occurs before the account holder reaches the age of 59 1/2.

Key Points When Considering a QDRO

• Plan administrator approval - The QDRO must be approved by the plan administrator to ensure it meets federal and plan-specific requirements.
• Exact language - The QDRO must include precise language outlining how the account will be divided. Ambiguities can lead to delays or denial.
• Separate QDROs for separate plans - Each retirement plan requires its own QDRO, so multiple QDROs will be required for multiple accounts.
• Legal and financial guidance - Given the complexity, it is highly advisable to consult with legal and financial professionals to prepare and review a QDRO.

Insight into Navigating the Division Process

Here is what the process of dividing retirement assets may look like:

• Assessment and documentation - The first step involves identifying all retirement assets and obtaining their current valuations. This often requires collaboration with financial advisors and retirement plan administrators.
• Marital vs. separate property determination - Using account statements and other documentation, determine which portions of the retirement assets are marital property.
• Drafting the QDRO(s) - Work with a qualified attorney to draft QDROs that meet state and federal requirements. This step often involves coordinating with the retirement plan administrator to ensure compliance.
• Approval and implementation - Once drafted, the QDROs must be approved by the court and the plan administrator. After approval, the terms are implemented, and the retirement assets are divided as specified.

Mitigating Common Pitfalls

Understanding the rules and complexities associated with dividing retirement accounts can help avoid making costly mistakes. For instance, failing to account for potential taxes, survivor benefits, or cost-of-living adjustments might lead to an unfair division. Also, keeping up-to-date with changing laws and plan rules is essential.

Contact Our Schaumburg, IL Division of Retirement Accounts and Pensions Lawyer

If you need to address issues related to the division of retirement accounts in your divorce, a qualified attorney can make sure you will be able to take steps to protect your financial interests. Contact Anderson Attorneys, P.C. at 847-850-8899 to schedule a free consultation. Learn why our firm is one of the most trusted in the field of divorce and family law. With our guidance, you can navigate the complexities of your divorce and ensure that you will have the financial resources you need to move into the next stage of your life.