Protecting Your Future: Retirement Accounts in Divorce

Your retirement savings didn’t happen by chance – they are the result of years of discipline, determination and hard work. As you face the life changes that come with divorce, those funds are often the single most important asset to your long-term security. Retirement accounts deserve careful attention and a clear protection plan. At SAM LAW OFFICE LLC, we’re ready to help you preserve what you’ve built.

How Are Retirement Accounts Divided in a Divorce?

In Illinois, retirement accounts are treated like other marital assets and are divided equitably, which does not always mean a 50/50 split. The courts will examine several factors to determine a fair division, including:

• The length of the marriage
• Each spouse’s contributions, both financial and non-financial
• The age, health, and earning potential of each spouse
• Future financial needs and any tax implications

Portions of an account that were earned before the marriage may be considered separate property and remain with the original owner. However, any contributions made and growth that occurred during the marriage are typically divided. Our firm helps clients identify which portions of their accounts may be divided and works to achieve an accurate valuation.

What Retirement Accounts Are Divided in Divorce?

Many different types of retirement plans are addressed in a divorce. The most common include:

• 401(k)s and 403(b)s: Employer-sponsored defined contribution plans.
• IRAs: Individual retirement accounts, including traditional and Roth IRAs.
• Pensions: Defined benefit plans that pay a set amount upon retirement.
• Military and Government Retirement Plans: These have specific rules for division.

Each plan type has different valuation, division, and tax treatment requirements. Handling them correctly is crucial to avoid unnecessary penalties or negative tax consequences.

What Is a Qualified Domestic Relations Order (QDRO)?

Dividing retirement assets is not as simple as writing a check. To ensure the transfer of funds from one spouse’s retirement plan to the other happens without incurring immediate taxes or early withdrawal penalties, a specific court order is often required.

A Qualified Domestic Relations Order, or QDRO, is a specific court order required to divide certain retirement accounts, including 401(k)s and pensions. Its primary purpose is to allow the division to occur without triggering taxes or early withdrawal penalties. The QDRO document specifies how much of one spouse’s plan is transferred to the other and makes certain the transfer complies with federal law and the plan’s rules.

Not all accounts require a QDRO. For example, IRAs use a different legal document for transfers. SAM LAW OFFICE LLC works closely with financial professionals and plan administrators to draft and execute QDROs correctly, helping clients receive the assets they are entitled to.

How SAM LAW OFFICE LLC Helps Protect Your Retirement and Your Long-Term Security

Our firm takes a practical, strategic approach. We focus on protecting your long-term financial well-being, not just achieving a short-term settlement. We provide clients with the facts and options they need to move forward. 

Our Retirement Protection Strategies Include:

• Strategic Offsetting: Negotiating for you to keep more of your retirement funds by offsetting the value with other assets, like home equity.
• Accurate Due Diligence: Working to get a precise and verifiable valuation of all accounts involved.
• Tax-Focused Planning: Reviewing the tax impact of any proposed division before an agreement is finalized.
• Correct Documentation:Using the proper legal orders and timing to prevent accidental penalties or errors.

You can expect honest advice, a realistic assessment of your case, and a commitment to protecting what you’ve built.

Set Yourself Up for a Strong Financial Future

Divorce can reshape your finances in countless ways, but your retirement doesn’t have to be a casualty. The attorneys at SAM LAW OFFICE LLC combine practical experience with honest, straightforward advice to help you make smart choices that safeguard your long-term security. Contact us today to schedule a confidential consultation.