Property division in divorce can be complex, especially if it involves multiple properties, businesses and liabilities. In the initial property division process, the court must identify which properties are part of the marital assets. One of the usual inclusions for division is retirement accounts. Understanding the rules for this type of property can help parties negotiate and receive their fair shares.
Are all types of retirement accounts included?
Since there are several types of retirement accounts, it is understandable that some need clarification about which ones are part of the property division. Retirement contributions and any value increases during the marriage but before final judgment form part of marital assets. This includes voluntary individual accounts, 401(k) accounts and pension plans.
Ways to distribute
Illinois follows the equitable division rule and splits all marital assets between parties fairly and equitably. There is no one way to distribute assets in a divorce. Depending on the facts and circumstances of the case, retirement accounts can be split in any of the following ways:
- Each one keeping their own savings
- Lump-sum payment
- Exchange of assets of equivalent value
- Support payment
While parties can settle the terms on their own, the court will still review the settlement to ensure that it is fair and balanced.
Be wary of rules
It is also critical for parties to follow IRS rules on retirement accounts to avoid penalties for early withdrawals or retirement account managers not honoring the settlement agreement. For instance, for employment-based accounts, the parties must acquire a Qualified Domestic Relations Order.
No matter what property is involved, property division in divorce is challenging and one mistake can adversely affect parties. With proper research and adequate preparation, spouses can better face the rigorous process of divorce.