The division of marital assets is one of the more complicated aspects of divorce, and retirement accounts present a number of unique issues that can make creating a fair settlement difficult. Since retirement accounts, especially 401(k)s, are accumulated through the individual efforts of one spouse, learning that this asset may be subject to division in a divorce is hard for many to accept. However, any amount in a retirement account classified as a marital asset must be divided, unless the spouses agree otherwise.
Valuing an account and determining how to structure a settlement are complicated matters that do not always have easy answers. Often, a spouse is forced to choose between the pros and cons of short- and long-term options when dividing retirement accounts, and working with an experienced divorce attorney is necessary to receive a complete picture of the implications of any decision. Retirement accounts are often a couple’s most valuable asset, so taking the time to assess how to approach this issue is one of the more critical aspects of a divorce case.
Classifying a Marital Asset
In Illinois, anything accumulated by either spouse during a marriage is considered a marital asset. Thus, for retirement accounts, funds contributed or earned before the marriage would be considered a non-marital asset and exempt from division. Any amount contributed to the account or generated during the marriage would be divided, meaning some percentage of a preexisting retirement account would be part of the divorce settlement. Because the value of retirement accounts can vary greatly from year to year, working with a financial expert to determine what the present and future value of this asset should be is key to working out an appropriate settlement. Assessments can differ, so working with a skilled attorney to negotiate an agreed upon amount is important to resolving this issue.
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