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Illinois divorce attorney

Divorce is not an uncommon occurrence in the United States — hundreds of thousands of couples are divorced each year. In the past couple of decades, the number of older Americans getting divorced skyrocketed. These gray divorces, or divorces involving couples who are over the age of 50, saw the divorce rate doubled between 1990 and 2015. For those over the age of 65, the divorce rate tripled in the same time span. Despite the many reasons why a couple over the age of 50 would want to divorce, these types of divorces are often complicated and deal with issues that many other divorces do not have to deal with.

Spousal Support in a Gray Divorce

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Illinois divorce attorney, Illinois family lawyer, Illinois collaborative divorce lawyerSome people may not realize that money they put into a retirement account, like a 401(k) or IRA, during their marriage is not theirs alone. When the marriage ends in divorce, those retirement funds will likely need to be split just like every other asset and debt the couple has acquired while they were married. In order to avoid paying large fees on a retirement plan withdrawal, the couple will likely need a QDRO (qualified domestic relations order). An attorney can help walk the parties through the process, as it can get a little bit complicated.

What Is a QDRO?

A QDRO is an official decree, which must be approved by a judge, that orders one party to transfer funds from his or her retirement plan to the other divorcing party. Information that must be included in the QDRO includes the plan participant’s name and either a specific amount or percentage of the benefits that are to be paid to the other party.

The party who is receiving the funds must then receive the money as if he or she was the owner of the plan. Then the payee may use the money as needed, which will result in taxes charged to the receiver of the money, or he or she may roll it over into another plan, which makes the transaction tax-free.

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Posted on in Divorce

Illinois divorce attorney, Illinois family lawyer,If you are close to retirement and facing a divorce (sometimes called a “gray” divorce), the issues you will need to address are at least somewhat different than those faced by younger couples. For example, you probably do not need to worry about child custody, as your children, if there were any, may already be grown and out of the house. You do likely have a lot more assets in the form of bank accounts, retirement funds, shared real estate, and more that will have to be split between the two of you.

Where to Begin

Even if both parties are willing to share and compromise, there is more to splitting certain funds than one may realize. Rather than being able to just share an IRA or 401(k) like you might do with a bank account, there are rules that must be followed to avoid various fees and taxes. Often, individuals who have passed their middle-aged years have a variety of retirement accounts, and they can be tricky.

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qdro,A qualified domestic relations order (QDRO) is (i) a domestic relations order (ii) that creates or recognizes the existence of an "alternate payee's" right to receive or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan, and (iii) that includes certain information and meets certain other requirements as provided by law. ERISA § 206(d)(3)(B)(i); IRC § 414(p)(1)(A)

So, what does that mean? In more plain language, a QDRO allows a person incident to a divorce, legal separation, or dissolution of same-sex partnerships, the right to divide their retirement benefits with their former spouse. This is particularly important if only one spouse to the marriage was saving for retirement and said savings are held in a qualified retirement plan.

QDROs are governed by the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code of 1986 (the IRC), and the Plan holding the retirement funds. Unless incident to division in a divorce or similar domestic proceeding, ERISA and the IRC do not allow a retirement plan participant (i.e., the spouse saving for retirement by placing funds in a 401(k) Plan) to assign their interest in a retirement plan to another person. An exception to the anti-assignment rule occurs by way of a Qualified Domestic Relations Order.

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