Going through the divorce process in Illinois can be costly both financially and emotionally. One of the major areas of contention during this type of family law proceeding is the division of assets. A few tips may help people going through divorce to specifically address matters involving retirement savings.
The different types of retirement accounts call for different types of paperwork. A legal document known as a qualified domestic relations order, or QDRO, may be used to ensure the proper distribution of a person's 401(k) funds. The document divides the retirement account with a party, such as a dependent, spouse or ex-spouse, and asserts that it is within each person's right to have some of the money.
The benefit of a QDRO is that it eliminates penalties or taxes from taking any early distributions of the retirement plan. All employer-sponsored retirement plans and pensions require separate QDROs. Meanwhile, individual retirement accounts, or IRAs, require what is known as a transfer incident -- which also allows a person to move funds without creating unnecessary tax burdens.
Illinois residents who are going through divorce may be particularly worried about the outcome of their divorce proceedings if they are just a few years away from retirement. After all, the decisions made during divorce can have a huge impact on what happens to assets and may force individuals to alter their retirement timetables. Proper legal guidance may help divorcing individuals to pursue settlements that are in their best interests financially, while still considering the other party's wishes and needs.
Source: Time, "Who Gets Retirement Accounts in a Divorce?", AJ Smith, Nov. 16, 2015