The division of assets is a primary consideration in the majority of Illinois divorces. In many cases, there are multiple investment accounts as well as real estate and other assets that need to be accounted for. In each instance, the value of each item and how each item is transferred can have a significant impact on the individual and his or her financial picture following a high asset divorce.
Perhaps one of the largest assets available to the divorcing couple is in the form of workplace retirement accounts. Over the years, each individual’s retirement account has likely grown in value. In addition to the funds that the individual has contributed, the employer may have also contributed. This can result in a significant amount of money that may need to be considered in the divorce settlement.
In addition to the value of the account as it is currently held, one will want to consider how funds should be transferred, the taxable implications of such a transfer, and the requirements set by the employer. If funds are simply withdrawn from the account and given to a spouse, then these funds may be subject to taxation as well as an early withdrawal penalty. Through the use of a qualified domestic relations order, or QDRO, and a trustee-to-trustee transfer, these expenses may be avoided.
When determining how such assets should be distributed, the actual wording of the settlement is important. The value of investment accounts can change on a daily basis. For example, if the intent is for each individual to receive 50 percent of the account, this may only occur if the agreement states it as 50 percent rather than a set dollar amount. There are a number of financial considerations that need to be addressed when an Illinois couple is involved in a high asset divorce. An experienced attorney can work with the individual to make sure that he or she achieves the best possible outcome.
Source: cnbc.com, “How to avoid mistakes dividing up 401(k) assets in divorce“, Sarah O’Brien, March 7, 2018