divorce and pension plans

What Happens with Divorce and Pension Plans?

Many people are concerned about divorce and pension plans and what will happen to those and any other retirement accounts upon finalization of your divorce. People seem to think that if the pension is solely in their name (which it typically is), then their pension is theirs and they do not have to share it with their spouse when they divorce.  

The Courts consider this an asset of the marriage however, and you will need to divide your pension rights after divorce with your spouse. If you both have plans, and they are of equal value, then it is likely that each of you will retain your own pensions.  Illinois has established that all retirement and pension plans whether vested or matured, contributory or noncontributory, shall be treated like marital property.

The classification and reimbursement principles in 750 ILCS 5/503(a) and 5/503(c) apply to retirement plans and pensions and divorce in Illinois.  A pension that is established before the marriage, as well as its increases in value, remains nonmarital property; however, the marital estate may be entitled to reimbursement for marital contributions or for the significant personal efforts of a spouse that result in substantial appreciation. When evaluating divorce and pension plans, the courts have noted that an interest in a pension plan is marital property if a portion accrues during the marriage.

Separating 401(k) Plans, Pensions and Divorce in Illinois

To understand pensions and divorce in Illinois, however, you should know that Illinois does not divide pensions equally. Pensions are treated just like any other asset of the marriage. Trial courts who divide a pension equally, without considering the factors in our statute, can be overturned by the Appellate Court. In re: Marriage of Smith, the appellate court found that the trial court failed to consider the factors in the Illinois Marriage and Dissolution of Marriage Act.

Instead, the trial court’s finding that any income in the wife’s 401(k) earned during the marriage should be divided, half to each side as a matter of course and without considering the statutory factors, was an abuse of discretion. The appellate court remanded the case, instructing the trial court to consider the statutory factors in order to divide the wife’s 401(k) in just proportions. Equitable division of retirement assets, as with all other assets of the parties, requires consideration of the factors in §503(d) of the Act regarding pensions and divorce in Illinois.

Divorce and Pensions Plans, Retirement Accounts and Deferred Compensation

Deferred Compensations are also divided in a divorce. A deferred compensation benefit is earned by an employee for his or her service to an employer. As such, they are treated as earnings, and to the extent that a spouse earned those benefits during the marriage, they are considered marital property and are subject to division upon dissolution, like any other marital property.

Contact Anderson and Boback for answers to these and all questions related to retirement accounts, 401(k) plans and pension rights after divorce.  We are experienced in all family law matters and highly respected divorce attorneys with an understanding of Illinois divorce and pension plans.

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