Dividing Retirement Assets Upon Divorce

A top Chicago divorce issue is that of dividing retirement assets. When Illinois parties contribute to retirement assets during their marriage, a portion, if not all, of those retirement accounts are presumed to be marital property. Such accounts include, but are not limited to 401(k) accounts, IRA accounts, pension plans, etc. Pension benefits are relatively rare these days and should be treated very carefully when parties are divorcing. Some people incorrectly believe that once a party contributes to a retirement account during the marriage that the entire account becomes marital. This usually is not the case if a party made contributions to the retirement asset before the marriage. However, if a party begins contributing to a retirement asset after the marriage, then the retirement asset may be completely marital. If a retirement asset will be divided among the parties upon divorce, it may not be sufficient for the parties to simply state in their marital settlement agreement that the retirement assets are divided in a certain manner. In Illinois, the parties must execute a document called a Qualified Domestic Relations Order (“QDRO”). Depending on the retirement asset, a different document called a Qualified Illinois Domestic Relations Order (“QILDRO”) may need to be created. A QDRO or a QILDRO must be entered by the court and provided to the retirement plan administrator before it becomes effective.