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Protecting Your Rights In Family Matters

Retaining your 401(k) in your divorce

On Behalf of | Feb 7, 2021 | Divorce

Past posts on this blog addressed the fact that your 401(k) is subject to property division during your divorce in Illinois. You may look at your 401(k) as one of the primary sources of income during your retirement years. Thus, having to divide up any portion of it may have a dramatic impact on your plans.

This may prompt you to question whether it might be possible to retain your full 401(k) in your divorce. Many come to us here at Robert A. Chapski, Ltd. asking whether this is even possible. Like them, you may find the news that it is as a welcome relief. You should know, however, that such an action does not come without costs.

How to keep your full 401(k) in your divorce

Before understanding what those are, however, you need to know the method through which you can keep your full retirement fund. According to the 401(k) Help Center, the only way to retain the full value of your 401(k) is to convince your ex-spouse to relinquish their stake in it. Doing so requires that you give up your interest in a marital asset of comparable value.

The potential drawback of keeping your full 401(k)

This might seem like a small sacrifice in order to keep your retirement plans intact. However, you should know that when asking your ex-spouse to forego their interest in 401(k) funds, the court values those funds as their potential future value. That value reflects any potential investment returns and interest that might accrue between now and when your ex-spouse reaches the age of retirement. This means that you may have to give up much more right now than you anticipate.

You can find more information on complex property division throughout our site.

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