While a retirement account or pension may only be in your name, the amount you’ve contributed or earned during your marriage is generally considered marital property in Illinois. Dividing these assets in a divorce isn’t as simple as splitting a balance in half, and many people feel unsure how to handle this in the divorce process.
Divorce involves more than the house, bank accounts, and other assets that are easy to see. The money you’ve saved for the future through retirement accounts is often a significant part of a couple’s combined marital wealth. Retirement accounts generally have an established account value while pensions provide benefits in the future, so the two can raise different questions when a couple divides their property.
Does My Spouse Get Half of My Retirement Account in an Illinois Divorce?
The retirement benefits you’ve built up during your marriage are generally considered marital property. But a single account can include both marital and non-marital contributions, since what you contributed and earned before your marriage isn’t considered marital property.
Even when retirement benefits are marital property, Illinois doesn’t require the court to divide them equally. Instead, the court considers the circumstances of the marriage and each spouse’s contributions when deciding what would be a just proportion. This doesn’t necessarily mean both spouses contributed money directly to the account. Illinois law recognizes contributions to a marriage that don’t come in the form of a paycheck, like a person’s work taking care of the home or raising children. Those contributions can be considered when the court divides marital property.
How Are Pensions Divided in an Illinois Divorce?
Pensions are trickier to handle than retirement accounts because they’re generally paid in the future and can be harder to value at the time of the divorce. Their eventual value depends on things that haven’t happened yet, like how long that employee works, when they retire, and what the terms of their particular pension plan are.
Illinois law considers pension benefits as marital property, so the portion earned during the marriage may be included when the couple divides their property. The exact way a pension is divided depends on the retirement system and the terms of the benefit.
What Should I Know Before Dividing Retirement Benefits in a Divorce?
Dividing this type of asset isn’t as simple as a 50/50 division, so don’t assume that agreeing to split the retirement will be enough. A settlement can look fair and balanced on paper, even if it determines different financial outcomes for each spouse. For example, $100,000 in a retirement account may not have the same value to you as $100,000 in another type of property because taxes may apply when you withdraw retirement money. How the retirement benefit is transferred can matter, too.
When you’re going through your divorce, it’s important to clearly identify which portion of your retirement account is non-marital and which is marital. Once you have the amount, the way it can be divided depends on many factors. Even different types of retirement accounts such as 401(k)s and IRAs can have different rules.
A divorcing couple may agree that the retirement benefits don’t need to be divided between the spouses. One person may keep the entirety of their retirement, while the other gains different marital property of appropriate value instead, like equity in the house or another investment account.
As with other decisions made in the divorce process, don’t forget about the importance of getting everything down in writing. Having your own attorney can also help you understand what you’re agreeing to and make sure the documents needed to divide the retirement benefit are prepared and handled correctly.
Protecting Your Financial Future After Divorce
Retirement may not feel like a traditional marital asset, but it’s often one of the biggest assets a couple has. Different retirement plans require different approaches, so the best way to split them will be different in every divorce. Taxes can also affect what each spouse ultimately gets, which is another reason to look beyond the dollar amount when deciding how retirement benefits should be divided.
Retirement benefits can affect the rest of your property division, so it’s important to look at the whole picture before agreeing to a settlement. An Illinois family law attorney can help you understand what you’re dividing and what needs to happen to put the agreement into effect.
If retirement accounts or pensions are part of your divorce, the Law Office of David A. King, P.C. can help you understand how they may affect your property division.
