Most couples will experience some sort of conflict during a divorce. For many couples, the asset division process is one of the topics that bring about the most conflict. Prevailing during this process is important, because it can determine how financially stable you are after the divorce, and it can also affect your finances into the future. For many people, their retirement savings are among their most valuable assets.
In Illinois, retirement funds are considered to be marital property as long as they were acquired during the marriage. Marital assets may include individual retirement accounts, non-qualified plans, defined contribution plans and accounts, and pension benefits. These retirement funds must be divided between divorcing spouses, which can become tricky. In most cases, this is done using a Qualified Domestic Relations Order or QDRO.
What Is a QDRO?
A QDRO is a legal document that defines how retirement assets will be split between spouses. It acts as a set of instructions to use when the time comes to disburse retirement benefits from qualified retirement plans, such as a 401(k). Using a QDRO to transfer these funds will allow ex-spouses to avoid taxes on these amounts or penalties for withdrawing funds before reaching retirement age...
If you are facing the possibility of a divorce, you and your spouse will need to address a number of important considerations along the way. For example, one or both of you will likely need to find someplace to live. If the two of you have children together, a parenting plan will need to be developed that includes arrangements for the allocation of parental responsibilities and each parent’s parenting time. Simply adjusting to everyday life as a single person is likely to present challenges in and of itself. However, many of the most difficult concerns in any divorce tend to focus on a couple’s finances, including how their marital property will be split and whether either spouse should expect spousal support payments.
Property Division and Maintenance Considerations
The Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5) provides that decisions about money and property in an Illinois divorce are to be made based on the circumstances of each unique case. If you and your soon-to-be ex-spouse cannot come to a settlement agreement, it will be up to the court to identify and divide the marital estate, as well as to decide if there is a need for spousal support – known in the law as “maintenance.” In making these decisions, a family court judge is required by law to consider a variety of factors related to each. Such factors include:
- Each spouse’s income, earning capacity, and available resources
- The role each spouse played during the marriage, how that role affected the value of the marital property, and its effect on the earning ability of the other spouse
- How long the marriage lasted and the standard of living established in the marriage
- How maintenance and allocated property will affect each spouse’s tax obligations
- How parenting responsibilities are being divided
- Any valid agreements between the spouses, including prenuptial and postnuptial agreements
Putting the Pieces Together
Illinois law also directs a presiding judge to take into account the overall financial situation present during the marriage, as well as in the pending divorce. It is important to recognize that the asset division process and spousal support determinations are not independent considerations. In fact, the law specifies that each might affect the other. For example, if you have asked for spousal support in your divorce, and the court is deciding on how to divide your marital estate, the judge is statutorily obligated to consider whether property should be given to you “in lieu of or in addition to maintenance.”...
There are many assets the courts will divide between a couple during divorce proceedings. Some of the most common include the marital home, a business acquired during the marriage, bank accounts, and vehicles. Retirement accounts are one type of asset that many people do not consider when entering into property division negotiations. However, accounts such as IRAs, 401(k)s, and pensions are subject to division between spouses, just like other marital assets. How they are divided and when the funds are distributed will depend on several different factors.
Retirement Accounts as Marital Property
In Illinois, as in all other states, property is considered to be either marital property or separate property. Separate property is any property either spouse owned prior to the wedding that was brought into the marriage. Marital property, on the other hand, is any property that was acquired during the marriage by one or both spouses.
These same rules apply to retirement accounts. If one spouse had acquired funds in a retirement account prior to the marriage, those funds are considered separate property. However, any funds that went into the account after the marriage are considered marital property, even if only one spouse contributed to the account....
If you are getting a divorce in Illinois, you may be expecting to receive an equal 50 percent of the property you and your spouse own. However, Illinois is an “equitable distribution” state when it comes to the division of marital property. This means that property is divided fairly, but not necessarily equally. Although many divorce cases are finalized with a 50/50 split, this is not always the end result. Judges may consider a variety of factors when determining how to fairly divide assets, including:
The Financial Position and Earning Power of Each Spouse
If one spouse is going to be in a bad financial position after the divorce, and the other spouse is very well off, a judge will take this into consideration. This is particularly true if the spouse that does not have a lot of finances stayed home to look after the household and take care of the children.
When one spouse did stay home, a judge will also consider their ability to find a well-paying job once the marriage ends. If a parent had stayed home for a very long time caring for children, they may find it difficult to get back into the workforce. Therefore, they may be awarded more in property or assets....
Divorce rocks the finances of every couple, including those with higher incomes and assets. Weathering the fallout of the loss of a combined income and the division of marital assets is one of the hardest adjustments any divorced person must make. Knowing which assets to take and which are better off relinquished or sold is not easy, especially when factoring in the emotional attachment spouses form over certain items. However, finding the right balance is the only way most divorced individuals have a realistic chance of recovering from this financial shift. The marital home is the largest physical asset most couples own, and it often looms large in the property settlement process.
Equitable division is the rule that governs property division in Illinois, which means the court will look for a fair division of assets, but not necessarily an equal one. Under this system, a spouse may be required to argue why he or she should receive a certain asset. When addressing the marital home, specific questions should be asked before making a strong stance in favor of keeping this property.
Questions to Ask About Keeping the Family Home
In many cases, at least one spouse will form a strong attachment to the family home, and either spouse may find it difficult to think of selling the home or giving up ownership to the other spouse. Good reasons do exist for keeping the home, including providing continuity for children, maintaining some form of financial security, and the possibility of appreciation in value....