Divorce and Retirement Accounts

May 27, 2025

Divorce involves dividing assets, and retirement accounts frequently fall into this category. Determining how to fairly allocate these accounts in Illinois requires careful attention to state law and federal regulations. This post will explain how retirement accounts are typically handled in Illinois divorce cases and the importance of obtaining proper legal counsel to protect your financial well-being.

Retirement Accounts as Marital Property

 

In Illinois, assets acquired during the marriage are generally considered marital property and subject to division. This often includes retirement accounts, such as:

 

  • 401(k)s
  • IRAs
  • Pensions
  • Profit-sharing plans
  • TRS accounts
  • Military Retirements

 

However, it’s important to understand that not all of a retirement account’s value is necessarily marital property.

Non-Marital Property Considerations

 

If a portion of a retirement account was accrued before the marriage, that portion is considered non-marital property and is typically not subject to division. Determining the marital portion requires careful analysis of account statements and contributions made during the marriage. This can involve:

 

  • Tracing: Identifying the contributions made before and during the marriage.
  • Valuation: Determining the account’s value at the time of the marriage and at the time of the divorce.

This is because the increase in value of the account might be marital, or it might not be

 

Qualified Domestic Relations Orders (QDROs)

 

To divide certain types of retirement accounts, particularly those governed by federal law (like 401(k)s and pensions), a specific legal document called a Qualified Domestic Relations Order (QDRO) is necessary. Other accounts are divided with specialized orders, such as Military Benefits Orders, and the like.  A QDRO is a court order that instructs the plan administrator to distribute a portion of the retirement account to the non-account-holding spouse. QDROs must meet specific legal requirements to be valid and enforceable. Without a properly drafted QDRO, the retirement account cannot be divided.

 

Why Proper Handling Is Essential

 

Dividing retirement accounts in a divorce incorrectly can have serious consequences:

 

  • Tax Penalties: Improper distributions can result in significant tax penalties for both parties.
  • Loss of Benefits: Errors in the division process can lead to a loss of retirement benefits.
  • Enforcement Issues: A poorly drafted order may be difficult or impossible to enforce.

 

Important Note About My Practice

 

While I assist clients with various aspects of divorce, the drafting and handling of QDROs and other complex retirement account division matters require a high degree of technical knowledge and experience. I strongly believe in ensuring my clients receive the best possible guidance in these situations. Therefore, I often collaborate with or refer clients to attorneys who focus their practice on drafting QDROS. Their focused experience helps to ensure that these important financial assets are divided correctly and that my clients’ long-term financial security is protected.

 

Seeking Guidance in the Metro East

 

If you are facing a divorce in the Metro East and have retirement accounts to divide, reach out to my office. Schedule a consultation to see if I can help you leave more money in your retirement account after your divorce.

 

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. It is essential to consult with an attorney to discuss your specific situation and legal options