When Illinois couples get a divorce, they need to take steps to protect their investments. These might be IRAs, securities, annuities or other assets. After the divorce, they should ensure that their estate planning reflects this life change, including removing the ex-spouse from beneficiary designations unless they still want the former spouse to inherit those assets.
While the divorce is underway, there are several other steps they should take. A spouse who has not participated in the financial side of the marriage will need to understand what assets are owned as a couple and separately and should get access to those accounts. Depending on what those assets are, there are several considerations to keep in mind. For example, a 403(b) or 401(k) can only be divided in a divorce after a plan administrator approves a document called a qualified domestic relations order. The rules are different for an IRA, which will require a divorce decree and new IRAs for each person to roll the distribution into to avoid penalties and taxes.
Assessing the value of assets should always be done with an allowance for any costs associated with them. For example, if securities are sold, there will be a capital gains tax. Other assets, such as annuities, may have certain rules associated with withdrawing from or splitting them.
Some couples might agree to divide up assets in a different way to make the process easier. For example, rather than going through the complex process of having a QDRO completed, one person might keep the 401(k) while the other person takes a savings account or keeps the home although a house can also raise several issues. People sometimes fail to account for expenses associated with maintaining it on one income, and refinancing may be necessary to remove the other party from the mortgage.