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...
Dividing the marital home is a large part of many divorces and this is an extremely complex process. Couples typically have three choices when dividing the home—they can continue to be co-owners, one spouse may solely keep the home, or the couple can sell the home and divide the proceeds fairly. Regardless of the option the couple chooses, or a judge decides during property division hearings, it is important to have a professional appraisal performed on the home so everyone is aware of its current market value.
Reasons to Get an Appraisal
You may think you can estimate how much your home is worth but that number may not be accurate. Having a professional appraisal done on your home will provide you with a concrete number you can use when dividing or selling your house. This will also help avoid disputes if you and your spouse cannot agree on the value. If a dispute does arise about the value of the home, a family law judge may order you to have the home appraised anyway. Already having an appraisal in hand can help the divorce process move quicker. The value of homes changes regularly, depending on market conditions and the condition of the overall property. So, unless you have had it appraised very recently, your home’s value may have changed since your last appraisal....
After English singer-songwriter Adele divorced her husband in 2019 without a prenuptial agreement in place, many wondered what would happen to her amassed wealth. Ultimately, the divorce settlement was worth 140 million English pounds, which is more than 175 million dollars in the United States. Some people have stated that the fact that Adele did not have a prenup in place was a mistake. However, there are other mistakes many people make when going through a high net worth divorce. If you are about to go through a divorce, and you or your spouse have a high net worth, you will want to understand how you can protect yourself financially. Here are some common mistakes that you will want to avoid:
1. Hurrying the Divorce Process
No one wants to go through a lengthy divorce, but high net worth divorces are rarely over quickly. Multiple professionals often have to get involved, including attorneys, financial advisors, forensic accountants and others. These professionals can provide valuable insight into how to resolve the legal and financial issues involved, and they can help divorcing spouses reach a fair settlement. If you try to rush the divorce process, you may end up making hasty decisions that will cost you in the long run, and you may regret these mistakes for years to come.
2. Letting Emotions Take Over
Feelings of guilt, anger, regret and resentment are common in any divorce. These emotions are all completely normal, but you will want to do your best to put them aside and to ensure that they do not influence the decisions you make. Failure to do so can lead to mistakes that you may regret in the future....
In many cases, people going through a divorce find themselves in a difficult situation simply because they did not fully prepare for their situation and take steps to protect themselves. If you know that divorce is in your future, there are a few steps you can take to help the process proceed more smoothly and ensure that you are able to achieve a fair settlement that will meet your ongoing needs.
Copy Important Documents
Before filing for divorce, you will want to make copies of all of the important documents pertaining to your finances. These may include tax returns, wills, mortgage documents, life insurance policies and statements for bank accounts, credit cards, retirement accounts or investments, as well as any other documentation related to your marital property. This will allow you to have a full understanding of the financial issues you will need to address during your divorce.
Understand Household Finances
You should keep track of your utility bills, mortgage or rent payments and other household expenses. You will also need to be sure you understand your spouse’s income as well as your own and any debts or financial obligations either of you may have. If either you or your spouse are self-employed or own a business, you should keep track of all of the income that comes in for a few months prior to the divorce. By understanding your ongoing income and expenses, you will be able to address these issues during divorce and ensure that you can meet your needs after your marriage has been dissolved....
Even if your marriage has broken down, you may not want to go through the long, drawn-out process of divorce. You know you will have to see your ex in many unpleasant circumstances, and you may want to avoid interacting with him or her altogether. If you are in an abusive relationship, this can be a particularly important issue.
You may have heard about the possibility of getting a divorce through the newspaper in which you simply publish the divorce announcement and have your marriage dissolved. Is this true, though? Can you really just publish that you want a divorce in a newspaper and have the process finalized? While this may be possible in Illinois, the process of doing so is not easy, and you will have to meet several criteria before you start paying for that ad space.
What You Need to File Through Publication
In a few rare cases, you can get divorced through a publication in the newspaper in Illinois. Before you do so, you will need to file a petition for divorce with the court, ask the judge to allow you to serve the divorce papers through publication, and then prove why you need to do so....
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....
The end of a marriage can occur for a wide variety of reasons – from the somewhat innocuous and slow-developing issue of growing apart to extreme acts of betrayal and violence. Most couples are somewhere in the middle, but a legitimate question may arise when one spouse is convicted of a crime, and the other spouse must choose whether to continue the marriage or use this event to justify divorce. Depending upon the circumstances of the criminal conviction, the repercussions on the integrity of the marriage can be significant, and spouses may wonder what impact the conviction will have on the outcome of divorce.
Unless a person comes into a relationship with a criminal history, spouses typically do not anticipate this possibility nor necessarily know how to respond if it does happen. A recent example of this conundrum involves the marriage of a man accused of kidnapping and killing an international student at the University of Illinois Urbana-Champaign. His wife filed for divorce recently, citing irreconcilable differences and no possibility of reconciliation in her petition.
When couples divorce, it is common and understandable that each side wants to offer his or her perception of why the marriage did not last, but understanding what factors matter and why they will help to produce a more favorable outcome is crucial....
Recently, Jeff Bezos and his wife, MacKenzie, announced via Twitter that they were going to divorce. Jeff Bezos is the founder of Amazon and is thought to be worth approximately $136 billion, making him one of the wealthiest men in the world. The public was soon shocked to learn that they did not have a prenuptial agreement. What does this mean for the Bezos’ divorce? Is it possible that MacKenzie could be left with nothing?
That scenario is not likely. Due to the fact that the Bezos’ live in Washington, a community property state, both spouses are probably going to receive 50 percent of all assets accumulated during the marriage. The news has also left many wondering how this division of property would work if the couple lived in Illinois. The question is a good one, as Illinois operates under very different rules.
Community Property States
Currently, only nine states in the country are community property states: Louisiana, Arizona, California, Texas, Idaho, Nevada, New Mexico, Wisconsin, and of course, Washington. In these states, any income, property, or other assets acquired during a marriage are considered community property. Upon divorce, each spouse will then receive 50 percent of those assets, in most cases. This means that even without a prenuptial agreement, MacKenzie and Jeff Bezos will likely each receive half of the income earned from Amazon during their marriage, in addition to half of the many real estate properties they own and any other financial assets....
Struggling to make ends meet puts a strain on the best of relationships, and if it lasts for a considerable period of time and/or is extreme, overcoming this challenge may prove more than a couple can bear. Marital assets and debts must be divided in divorce, and when finances start to break down, the ramifications can reach all the way to the possible loss of a home through foreclosure. Navigating the divorce process is hard enough in straightforward circumstances, but it can become quite complicated when an active foreclosure is being sought, because the mortgage lender has a legitimate interest in how this asset is divided. This situation may be further complicated if one spouse wants to attempt to save the home and assume sole possessory rights and ownership.
In an unusual case, an Illinois appeals court upheld a default judgment that terminated the interest of a divorcing couple’s mortgage lender in the marital home, which was in the middle of a foreclosure, because it failed to respond to a complaint by the husband challenging its validity. While uncommon, this case highlights how intertwined a divorce and a foreclosure can be.
Who Is Responsible for the Debt?
Financing the purchase of a home involves the legal assumption of the obligation to repay a promissory note, the contract that outlines how long and how much the buyer must pay to satisfy the loan. In addition, a lien is placed on the property, which gives the lender the right to repossess the property in the event of default. Most couples jointly sign these documents, making both spouses liable to meet the terms or face foreclosure....
The common perception is that couples who are older and have weathered decades of ups and downs in their relationship will stay together forever. Of course, this is not always the case, and older couples do get divorced, even after 30 or more years of marriage. In fact, divorce among spouses over the age of 50 (known as “gray divorce”) has doubled since the 1990s, meaning more people approaching or in retirement must make major life changes.
Divorce between older couples may be more amicable, but different financial considerations come into play that need to be addressed. Regardless of the length of a marriage, spouses are required to divide marital assets and debts. However, older couples have less time to recover from the financial consequences of dividing everything by half, and they often have more complicated asset portfolios to distribute. Importantly, property division is rarely, if ever, revised by the courts after a divorce has been finalized, so getting it right the first time is crucial.
General Property Division Concerns
Illinois follows the equitable distribution model for property division in divorce that means marital property is divided according to what is fair, rather than strictly down the middle. Marital property includes anything acquired by either spouse during the marriage, as well as certain commingled marital and non-marital assets....
When a couple decides to marry, no object is more symbolic of this commitment than an engagement ring. The level of commitment this piece of jewelry represents is reflected in the thousands of dollars typically spent. Consequently, if the marriage does not occur, or the relationship ends in divorce, the purchaser of the engagement may want the item back, particularly if the piece of jewelry is a family heirloom. However, the receiver may conceivably view the ring as a gift that was freely given, and thus, not necessary to return.
These differing points of view can add more tension to an already combustible situation, and while filing a lawsuit to demand the return of the ring may seem tempting, resolving the situation privately is best for reducing additional emotional pain and unnecessary expense. However, in the context of divorce, fighting over a ring is often connected with the bigger question of which assets are considered marital property. An engagement ring, though, maintains a unique status under the law, and thus the right to possession is treated somewhat differently than other kinds of gifts.
Keeping Gifts Generally...
If you have been following the divorce saga of Illinois’ richest man, hedge-fund billionaire Ken Griffin, you may have read that his wife recently filed Court documents alleging that Griffin plans to end her exclusive occupancy of the couple’s marital home and will no longer pay upkeep costs.
While many of us cannot relate to the lives of the very wealthy, the case raises a question that comes up almost every time when meeting with a client for the first time — who gets to live in the marital home during the divorce?
Temporary Relief for Possession of Marital Home...
My spouse and I have been married 15 years. I want to get a divorce, but I have been a stay-at-home mom for the past 10 years. I have no money, and everything is in my spouse's name. I do not know how I will be able to start over from scratch.
Questions similar to the one above are often posted to social media and divorce-related websites, and understandably, those in these situations are concerned. When it comes to divorce, there is a difference between marital and separate property, and separate property is not involved in the division of property. But simply because one spouse's name is not on a title does not make it separate property.
Property Division in Illinois Divorce...
Valuation Date for Illinois Divorce Assets
Under Illinois law, assets in a divorce are valued as of the date of trial, or as close to it as possible. Assigning value to an asset can sometimes be difficult, either due to circumstances (the trial date is postponed the day before) or the type of asset (stock prices fluctuate based on changing markets)....
The wedding is a faded memory now, and you and your spouse agree that divorce is the best option. You have accumulated very few assets, and you both agree on the division of assets. Since you are both on the same page, is there a faster, easier way to end the marriage? In Illinois there is, and it is called joint simplified dissolution.
Requirements for Joint Simplified Dissolution
Joint simplified dissolution is available to Illinois residents who have been married for less than eight years and can agree how to divide both the marital property and marital debts. It is a streamlined process that greatly minimizes the stress of a contested divorce and can keep costs down. You and your spouse can complete the paperwork together, and can appear in Court for the hearing and entry of judgment the same day the petition is filed. Only one Court appearance is required....
The divorce has been finalized; the property divided, and you and your ex-spouse have moved on to the next phase of your lives. There may be one thing you forgot though, something neither of you will remember until it is too late: updating the beneficiary designations on your retirement accounts and life insurance policies.
Most people designate their spouse as the beneficiary of retirement benefits and life insurance proceeds, and then promptly forget about it. Or they may think that the divorce automatically revoked the now ex-spouse’s right to receive these assets at death. In Illinois, this could be a costly mistake. Failure to update your beneficiary designations following a divorce, or failure to include specific waiver of these rights in the divorce decree, can result in your ex-spouse getting the assets at your death.
Automatic Revocation of Estate Plan After Illinois Divorce...
For many couples, retirement accounts, whether 401ks, IRAs or pensions, make up the bulk of their assets. Even if only one spouse contributed to each account during the marriage, the assets are marital property and subject to division in a divorce. If the divorce occurs before the first distribution is made though, how can the accounts be divided without being subject to early withdrawal penalties? A skilled divorce attorney can help you navigate through this process.
Dividing Retirement Accounts
One way to divide retirement accounts is with a qualified domestic relations order, or a QDRO. A QDRO is a special order that requires the retirement plan administrator to either divide the account now, or make distributions to both spouses when they reach retirement age. There are certain requirements the QDRO must contain in order for the plan administrator to make the division, so it is important to meet with an experienced attorney who understands these very specific requirements....
Throughout your marriage, you and your spouse saved in anticipation of retirement. Your spouse put five percent of his/her monthly salary into a company funded retirement plan, which equates to 10 percent when including the company match. You both looked forward to retirement spending your golden years traveling, playing golf and relaxing. Now, however, you find yourself in the middle of a divorce. Most of your assets can easily be divided, except those retirement accounts, which are payable only to your wife. What can you do?
You can get a QDRO (pronounced quad-row).
QDRO for Dividing Illinois Retirement Accounts...
Before you were married, you and your future spouse had no doubt accumulated personal assets. And now as a couple, you and your spouse have likely accumulated marital property for which you can both claim ownership. Divorce is difficult for anyone, but it becomes increasingly more difficult when couples have differing ideas on the division of property during divorce proceedings.
Paramount to the determination of who gets what during property division concerns how the property is classified. The property is either classified as marital, meaning that there the couple has joint ownership of the property, or it is classified as nonmarital, which means the individual owns the property....