One of the most contentious issues in a divorce can be what happens to the financial assets. That’s why divorcing Illinois couples should keep in mind all the tax implications of a separation.
For couples who are 50 and older, the divorce rate is twice what it was in the 1990s. For those who are at least 65 years old, the rate is almost three times what it was. The division of assets for these older couples can be very complicated due to the higher likelihood that older couples will have well-funded pensions, IRAs and 401(k)s. Care should be taken with dividing these types of assets as there can be unexpected tax implications if they are divided in the wrong way.
In order to split a workplace retirement plan, such as a pension or 401(k), it will be necessary to acquire a qualified domestic relations order. A QDRO is a legal order that gives a spouse the right to obtain a part or all of the employer-sponsored retirement benefits of their ex-spouse.
The court decree can specify what percentage of the plan is to be given to the recipient or specify a dollar amount. The contents of the QDRO must adhere to the rules governing the retirement plan. That’s why one should ask the human resources department at their company to evaluate an order before finalizing their divorce.
A family law attorney may help a divorcing client obtain their desired settlement terms regarding how financial assets are divided. Legal counsel could contact the appropriate parties to ensure that the right procedure is being followed while dividing certain types of retirement funds.