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Divorce could mean division of your retirement account

Many people have marriages in which they have lived happily for many years. While your relationship may have started out happily enough, you may have reached the realization that you and your spouse no longer have much in common. Whether the relationship simply no longer satisfied you both or conflict at every turn had you living in an unhealthy environment, you decided that divorce was the best option.

Now, you will need to go through the various proceedings necessary to come to a final divorce settlement. You may have particular concerns when it comes to property division, and you are not alone in this aspect. When thinking about this part of the process, your house and other major assets may come to mind, but you may also want to remember that your retirement account could also take a hit during asset division.

401(k) as a marital asset

You may know that you have a 401(k), but you may not consider its benefits often as you understand that you cannot access the funds in that account without penalty until you reach retirement. However, because your retirement account falls into the category of marital assets, your soon-to-be ex-spouse could have claim to a portion of those funds. Again, you may not think losing some of your retirement funds is a big deal, but it could have major impacts later.

Early withdrawal

You already know that withdrawing money from your 401(k) early could result in penalties, so now you may wonder how those funds could go through property division without penalty. This step of the division process is where a qualified domestic relations order will come into play.

A QDRO allows for the naming of an alternate payee for a retirement account. However, the court must approve the document. Without the proper verifications, the necessary parties will not consider the QDRO valid.

Avoiding fund division

If you do not want to have your 401(k) divided during a divorce, you do not have to feel resigned to this type of outcome. You may have the ability to negotiate during the property division process to reach an agreement that allows you to keep the entirety of your retirement account in exchange for other assets. The specific terms of your settlement will depend on the details of your case.

If you would like to gain more information on asset division, QDROs, negotiations and other aspects of your divorce case, you may wish to utilize local Illinois legal resources.

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