What Will Happen to My 401(k) in My Illinois Divorce?

 Posted on October 04, 2023 in Divorce

When people are preparing for a divorce, they are often concerned with how it will affect them financially. Like so many Illinois residents, if you have a 401(k) retirement account, you are likely wondering what will happen to it as a result of your divorce. It is essential at this time to hire an experienced lawyer to guide you through the process of your divorce, as this will help ensure you have professional legal guidance throughout each step of your divorce, including as you work through important financial issues, such as the future of your 401(k) retirement account.

Illinois is an Equitable Distribution State

At the heart of Illinois divorce is the standard of equitable distribution. This seeks to ensure that when property is divided, it is done in a way that is fair. This brings us to the next important crossroads in Illinois divorce: marital vs. non-marital property.

Assessing Marital vs. Non-Marital Property

To determine the fate of your 401(k), it is crucial to distinguish between marital and non-marital property. Typically, any contributions to your 401(k) during the marriage are considered marital property subject to division. However, any contributions made before or after the marriage may be considered non-marital property, exempt from division. 

Qualified Domestic Relations Order (QDRO)

In cases where your 401(k) is subject to division, a Qualified Domestic Relations Order (QDRO) is often utilized. A QDRO is a court order that outlines the division of retirement benefits between spouses. It is crucial to consult with an experienced lawyer at this time to ensure the QDRO complies with federal and state regulations. 

Determining the Division

When dividing a 401(k), there are various methods that can be used to achieve a fair distribution. One option is the “present value” approach, where the present-day value of the account is determined, and an equivalent amount is awarded to the non-owning spouse using other marital assets. Another approach is the “shared interest” method, where the 401(k) account remains intact, and the non-owning spouse receives a percentage share of the benefits once the owning spouse begins withdrawing.

Negotiating a Settlement

Divorce is not solely about litigation. Instead, it often involves negotiations and settlements. It is crucial to work with an experienced attorney who can help you negotiate a fair settlement that takes into account the division of your 401(k) and other assets. 

Contact a Joliet, IL Divorce Lawyer

For lawyers you can trust, contact the experienced Plainfield, IL divorce attorneys with Law Offices of Tedone and Morton, P.C.. Call 815-666-1285 for a free consultation.