Many Peoria residents have 401(k)s or comparable tax-favored retirement plans for their workplaces. These investment accounts can be very helpful for families and individuals who are trying to build up enough wealth to retire comfortably.
However, when a couple decides to divorce or undergo a permanent legal separation, 401(k)s can present a special challenge when it comes to divvying up marital property.
Like just about any other financial account, a 401(k) will be considered an asset of the marriage in Illinois unless certain exceptions apply. This means that a couple will have to split their retirement plans in some way. While one may be able to negotiate a division that allows each spouse to keep his or her own plan outright, dividing a 401(k) may be necessary in some situations.
In such occasions, a couple will have to negotiate how to divide it or will have to let a judge decide the issue. Making sure that the process is fair to one's interests may require some legal knowledge and skill, as well as some thorough investigation.
Once the property gets divided, there is one other important step. This point is where a QDRO, which is short for qualified domestic relations order, becomes important.
As the name implies, the QDRO is a separate order from the court, beyond the parties' decree or settlement agreement, that describes to the fiduciary of the plan's funds how to divide them. When done correctly, a QDRO will ensure that the wishes of the parties, or court, are carried out promptly. Moreover, the QDRO will preserve the tax benefits offered by the plan to the plan's owner.
Drafting a QDRO can be complicated and heavily dependent on the facts of the individual case. An attorney must have an eye for detail when drafting these documents in order to make sure that a client's interests are protected as intended and done so without undue delay.