In Illinois, assets are distributed in an equitable fashion in a divorce. This means that you could lose a portion of anything that was acquired during your marriage such as a car, home or funds in a retirement account. However, there are steps that you might be able to take in an effort to protect a retirement account from being subject to a final order.
Include the account in a prenuptial agreement
You can use a prenuptial agreement to stipulate that your retirement savings are to be labeled as separate property in a divorce proceeding. Typically, state law says that retirement accounts are joint assets even if you were the only one contributing to the account. However, when structured properly, a prenup can serve as an effective form of asset protection. If necessary, you can create a postnuptial agreement after the wedding that can help you accomplish your asset protection goals.
Negotiate with your spouse
If your spouse was not open to a prenuptial agreement, you can still protect retirement assets by agreeing to give up other items. For instance, you could agree to let your spouse keep the family home in exchange for not touching your retirement savings. You could also agree to increase alimony payments or take other steps in an effort to keep an IRA or 401(k) intact.
A portion of the balance may be separate property
You may be able to argue that only a portion of the account’s balance was accrued during the marriage. In such a scenario, only the gains realized during the marriage are likely to be seen as a joint asset. Although you may still experience a significant setback, it won’t be as bad as it would be if you lost half of everything you saved.
