How Are Retirement Accounts Divided in a Gray Divorce?

 Posted on July 25, 2024 in Divorce

Retirement accounts and pension plans are often among the largest marital assets divided in a divorce. This is especially true in gray divorces, which usually happen after retirement benefits have had more time to accrue in value. IRAs, 401(K)s, 403(b)s, and defined-benefit pension plans are all examples of financial assets that are commonly divided between spouses who divorce after 50.

However, dividing retirement funds is often a complicated legal process, especially considering that Illinois is an equitable distribution state. This means that Illinois courts divide marital assets fairly, not equally. The changes in a retirement fund’s value also add to the complication of dividing the asset. Divorcing couples are encouraged to create a property division agreement on their own, and may be ordered to attend mediation to facilitate that effort. If negotiation and mediation fail, Illinois law leaves property division largely up to the judge, which is why it is important to have a sharp Illinois gray divorce attorney representing you in court.

Are Both Spouses Entitled to Retirement Benefits?

Under Illinois law, anything that was gained during the marriage by either party — with some exceptions — is considered marital property and belongs to both parties. Anything that a spouse acquired prior to the marriage is non-marital property and belongs only to that spouse.

This makes the division of retirement accounts somewhat more complex. Usually, whatever value the fund had when the marriage began belongs to the account owner. However, whatever value the fund accrued throughout the marriage may belong also to the other spouse. The first step is to value the retirement accounts and pension funds, which is best done by a financial expert.

How Are Retirement Accounts Divided?

How a court decides to distribute the retirement assets depends on the judge, your attorney, and several other factors. Since Illinois law instructs courts to divide marital property in a way that is "just," judges look at several elements before dividing the assets, such as:

• The income of each spouse

• The future earning capacity of each spouse

• The needs of each spouse

• Each party’s contribution to the marriage

• Which spouse has the majority of parenting time, or physical custody, of the child

• The child’s needs

• Any other factor a judge thinks is relevant

A court can divide a retirement asset in one of two ways. It can issue a Qualified Domestic Relations Order, which authorizes the other spouse — who is called an "alternate payee" — to receive money from the fund.

Or, a judge can decide to award the entire fund to its owner, without dividing any portion of it between the spouses. Then, instead of receiving money from the fund, the other spouse might be awarded another marital asset of equal value.

Contact a Naperville, IL Gray Divorce Lawyer

Dividing retirement accounts and pension funds is a complex process, but it is not the only one. Gray dIvorces can involve several complicated legal tasks, which is why you should seek an experienced DuPage County, IL gray divorce attorney. At Divorce Over 50 - Goostree Law Group, our extensive experience in gray divorces allows us to offer you excellent and unparalleled legal services for all your divorce needs. Call 630-634-5050 to schedule a free consultation with a skilled attorney today.