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Illinois divorce lawyersDivorce is a complex legal process with many potential financial pitfalls. This may be especially true if there is a retirement account, such as a 401K to divide. Laws and rules of the plan must be adhered to carefully or the parties stand to lose far more than just their future financial security. There is also the risk of severe penalties and extreme financial loss as early as the finalization of one’s divorce. Thankfully, it is possible to mitigate (and potentially even avoid) such issues. Learn more in the following sections, including how the assistance of a seasoned, competent divorce attorney can help improve the outcome in your Illinois divorce case. 

The Risks of Dividing a 401K in Divorce 

Like all retirement plans, 401K pension plans have certain rules regarding early withdrawals (before age 591/2). Fail to follow them and you could face early withdrawal penalties from the plan administrator as well as taxation from the Internal Revenue System (IRS). Sadly, you can still lose money when you follow the rules of the plan. For example, you could lose money from losses or gains in the 401K if the divorce decree uses a percentage to divide the account, rather than an exact dollar amount.

Tips for Dividing a 401K in Your Illinois Divorce

While there are many pitfalls that one may experience while dividing a 401K during a divorce, there are a few strategies that can help you mitigate the risks. These include:


Wheaton divorce lawyersDivorce requires you to consider and make decisions on many things you might not have previously considered (i.e. where you will live and who keeps the dog). Financially savvy individuals also consider the long-term implications of a divorce, like how they will fund their retirement and protect their estate. Learn more about this consideration in gray divorces, and discover how a seasoned attorney can assist with the process to improve the overall outcome of your case. 

Failing to Plan for the Unexpected

While death inevitably happens to everyone, people rarely think about it in advance. In fact, statistics indicate that less than half of all Americans have a will or trust in place. Unfortunately, this can have a devastating impact on their estate. Funds may be depleted in probate, assets may go unallocated, and children could be placed into foster care until a guardian can be appointed. Matters can be even more devastating if the individual happened to be going through a divorce at the time of their death. 


DuPage County divorce lawyersEven in the simplest of cases, divorce can be a complex matter. If you add in assets that are difficult to divide, such as a retirement account or pension plan, the process can become even more difficult to effectively navigate. Thankfully, divorcing parties can improve the outcome of their case by ensuring they have the assistance of a seasoned divorce team on their side. Learn more about retirement plans in divorce, including the importance, challenges, and risks completing a qualified domestic relations order (QDRO) with help from the following information.

What is a QDRO?

Most often seen in divorce proceedings, qualified domestic relations orders are used to instruct the plan administrator on how the benefits of a retirement plan will be paid to a non-employee (the spouse of an employee). Required only in ERISA-qualified plans, these documents are complicated and subject to approval from the administrator. There are also federal regulations that must be adhered to and tax consequences that one must consider when completing their QDRO. As such, individuals are discouraged from pursuing a QDRO without the assistance of an experienced legal professional.


Dividing Retirement Benefits During a DivorceFor many divorcing couples, retirement plans are one of the largest assets they have. Pensions and defined contribution retirement plans are generally subject to division during the divorce. That means that if a couple is married when benefits accrue, then the benefits should be considered in the division of property even if it will be awhile before the benefits are actually paid. This is one of the most complex subjects in asset division. For specific answers for your situation, contact a knowledgeable property division attorney.

General Rule

The Illinois Marriage and Dissolution of Marriage Act governs property division during divorce. Courts require that assets be split equitably, which does not necessarily mean equally. Generally, the benefits earned during the marriage are split between the couple. However, with some plans, especially pension plans, this can be a more difficult calculation than it may seem.

Division of Retirement Benefits during a Divorce

Of all the tricky issues to sort out during a divorce, the equitable division of retirement benefits is among the most complicated. Because you have spent years working to earn your pension, fill your retirement fund, and otherwise prepare for your future, splitting these funds requires great care, and a considerable amount of technical know-how.

One good starting point, however, is knowing that only funds that were added to these accounts during the course of your marriage will be eligible for division between you and your spouse. Any money that you contributed to 401(k)s, pension plans, annuities, IRAs, or other types of retirement funds before your marriage will be yours, and yours alone after your divorce.

The Process of Dividing Your Benefits Fairly

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