Retirement Plans and Benefits

Retirement benefits have become among the largest assets to be addressed during the divorce process.

Many parties who contemplate divorce are surprised to learn that their retirement benefits comprise a large share of the couple’s joint assets. Nevertheless, retirement benefits have become among the largest assets to be addressed during the divorce process. If the intricacies of retirement benefits and the laws that regulate them are not understood and carefully considered during the divorce process, parties may later discover that they have received less than the full retirement benefit that could have been made available. At the Chicago area divorce law firm of Schiller DuCanto & Fleck LLP, one of our partners limits her practice to the discovery, analysis, and allocation of retirement and related benefits incident to divorce as well as the preparation of Qualified Domestic Relations Orders ("QDROs"), Qualified Illinois Domestic Relations Orders ("QILDROs"), and other specialized court orders that allocate retirement benefits between divorcing parties. This in-house retirement benefit expertise assures our clients that they will receive the maximum benefit possible from these valuable assets.

In Illinois, as well as in most other states, retirement benefits that are earned during the period of the marriage are considered to be marital property and may be allocated between the parties in a divorce proceeding. Thus, when parties are contemplating or working through a divorce, they must learn what retirement benefits have accrued to both parties and how those benefits may be factored into a settlement or litigation strategy.

Among the details to be considered regarding accrued retirement benefits are the following:

  • What retirement benefits exist? Were the benefits earned because of employment? With what employer(s)? Over what period of time?
  • Were contributions made to the retirement plan at issue? By whom? When? Will those contributions directly affect the value of the retirement benefit to be paid? How?
  • When can benefits be paid? Now? At age 70½? At some earlier time? At some later time? 
  • How will benefits be paid? As a lump sum? In periodic installments over a certain time frame? As a monthly payment for the life of the employee? As monthly payments for the life of the employee and then, upon the employee’s death, as monthly payments for the life of the employee’s spouse? In some other form? In some combination of the above depending upon choices available to the employee?
  • What is the value of the plan? How does the value fluctuate given the chosen form, timing and recipient of the benefit?
  • What law regulates the retirement benefits at issue? Federal law? State law? Some combination? Which statutes? Which regulations?
  • Does the regulatory law allow for the allocation of the retirement benefits from the retirement plan directly to a former spouse? If not, if the employer can but has chosen not to participate in direct allocations, or if special circumstances in a given case make the direct allocation law inapplicable, what are alternative methods for dividing these retirement benefits?
  • If the plan will allow direct transfer of retirement benefits to a former spouse, what options may be elected by the former spouse? How can the timing and form of the benefit payment affect its value to the former spouse? To the employee?
  • Do the retirement benefits in an individual situation have some component that may be considered non-marital property by the state court? If so, how will the court determine the marital portion?
  • If current law permits the employer/retirement plan administrator to provide less than the full benefit available collectively to an employee and his or her former spouse, how can the client be certain to receive the full benefit payable under the retirement plan?

IL divorce lawyers are expected to know many areas of law in order to address effectively the issues that may arise in each divorce case. It is unrealistic to expect that a general divorce attorney will develop sufficient expertise in the intricacies of the laws governing retirement benefits and their allocation in divorce on the basis of one or two cases per year. It is also unrealistic to expect that attorneys in a firm specializing in employee benefits law will develop sufficient expertise in the nuances of divorce law as they relate to retirement plans on the basis of one or two cases per year. At Schiller DuCanto & Fleck LLP, a partner with eleven years of highly specialized experience in this challenging blend of employee benefits and divorce consults with all Schiller DuCanto & Fleck partners, as well as with divorce attorneys outside the Chicago firm, to ensure that they appropriately address all relevant issues regarding our clients’ retirement benefits and develop legal strategies to maximize those benefits either through settlement or trial.

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