You may be wondering how an Illinois court would treat your retirement accounts in a divorce. Even though Illinois is not a community property state, it will still divide your 401(k) to an extent in a divorce. This will require you to adjust your plans for retirement based on how much of your retirement account your spouse is awarded during the divorce.
The 401(k) is subject to division
In a divorce, it is the marital estate that is subject to division. this includes any assets that are acquired during the marriage. Even if your retirement account was opened before the marriage, the fact that you contributed to it during the marriage makes it part of the marital estate. The court may award as much as half of the retirement account to your spouse. However, when it comes to a retirement account, the court will also consider the difference in earnings between you and your spouse before they reach a decision.
A Distribution or a lump sum?
If you are receiving an award from your spouse’s retirement, you will need to consider whether you want to retain the ownership or take a lump sum. If you do not need the money, it is better to not take the distribution because you will need to pay taxes and a penalty as well. The best solution is to negotiate with your spouse so that the division of the account is not completely up to the court.
If you are starting the divorce process, you should seek the services of a divorce attorney to learn more about how the assets may be divided. The attorney may assist you by negotiating with the other spouse on your behalf. Often, the best thing that you can do is agree to a comprehensive divorce settlement, and the attorney could help you as you try to resolve your divorce.