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Four Steps for Dividing Retirement Assets in DivorceRetirement assets grow in importance as marital property the longer you are married. If you divorce after several years of marriage, they could be one of the most valuable properties you own. As with all marital properties, you must include your retirement benefits as part of your division of property, and figuring out how to do so will be one of the most complicated parts of the divorce process. In general, there are four steps to determining how you will divide your retirement benefits as part of your divorce agreement:

  1. Valuing Your Benefits: To start, you need to know the current value of your retirement benefits. Retirement accounts are classified as defined contribution plans and defined benefit plans. It is easier to determine the value of a defined contribution plan because it is an individual account that you are paying into. With a defined benefit plan, your retirement benefits are part of a group account that will pay you based on a formula, and estimating its value is based on your life expectancy and the account's interest rates.
  2. Identifying the Marital Portion: Once you know the value of your retirement benefits, you must determine how much of it counts as marital property. The amount that your retirement benefits increased in value during your marriage is the amount that is marital property. Increases can come from your contributions to the plan, interest accrued on your holdings, and investments made with the money. The cut-off date determines when you stop counting increases in value towards your marital property. In Illinois, the date that a couple separates is usually the cut-off date.
  3. Dividing the Benefits: Because Illinois is an equitable division state, you do not have to divide your marital retirement benefits evenly between each other. When a divorce court determines whether the division of retirement benefits is equitable, they will consider the duration of the marriage and the economic resources of each spouse. You may be able to keep all of your retirement benefits in exchange for other marital properties, such as your home.
  4. Transferring Benefits: With many retirement plans, people are entitled to benefits based on being an employee or member of an organization. In order to receive benefits that you would not otherwise be entitled to, you will need a court order to transfer a portion of these benefits. A Qualified Domestic Relations Order is for private retirement benefits, such as a business’ retirement plan. A Qualified Illinois Domestic Relations Order is for retirement benefits provided by the Illinois state government. A Military Retired Benefit Division Order is for anyone who receives retirement pay because of their military service.

Contact a Kane County Divorce Lawyer

Dividing retirement benefits as part of your divorce may take the combined efforts of your divorce lawyer and a financial professional, such as an actuary. A St. Charles, Illinois, divorce attorney at Goostree Law Group will determine how to include your retirement benefits as part of your divorce while still protecting them. Schedule a free consultation by calling 630-584-4800.

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Could a Reverse Mortgage Help Your Gray Divorce?It can be difficult to continue to make house mortgage payments on your own after your divorce. However, you may be able to keep your marital home for the foreseeable future if you are able to get a reverse mortgage on your house. Reverse mortgages are available to people who are at least 62 years old and have a large amount of equity in their home – usually at least 50 percent. You use the money you receive from a reverse mortgage to pay off the remainder of what you owe on your home mortgage, with the surplus available for other expenses. Gray divorcees should consider whether a reverse mortgage could help them during the division of property, though there are risks.

How It Works

Assuming that you qualify, you can apply for a reverse mortgage – also known as a Home Equity Conversion Mortgage – with lenders who specialize in this type of loan. The amount of money that you can borrow will increase in conjunction with your age and the value of the property. With a reverse mortgage, you no longer make mortgage payments on your home or payments on the loan as long as you remain in the house. The loan and interest are due when:

  • You die;
  • You decide to sell or leave the home;
  • The home is unoccupied for a stipulated amount of time; or
  • The lender forecloses on your home.

The lender recuperates the money from the reverse mortgage when selling the home. You cannot owe more on the loan than your property is worth, but the lender will protect its investment by requiring you to keep up with property taxes, home owner’s insurance, and maintenance of the property. Failing to meet these standards allows the lender to foreclose on the property.

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Should You Keep or Sell Your Vacation Home During Divorce?Owning a second home can complicate your high asset divorce. If you want to keep the vacation home for yourself, you will need to give up other valuable marital properties in return. Neither of you may want the property because you cannot foresee getting the same use and enjoyment out of it after you are divorced. Some divorcing couples choose to sell their vacation homes and divide the proceeds. You must weigh the positives and negatives when deciding whether to keep or sell a second home.

Keeping the Home

The financial and emotional value in owning a vacation home may be greater than what you could actually receive in a sale. By keeping the home, you have the option of sharing use of it with your former spouse or renting it to other vacationers. Your enjoyment from the home is also a valid reason to keep it. However, you should consider the practical cost of owning the home:

  • Can you afford the continued upkeep of the home, including months when it is unoccupied?;
  • Can you afford to pay property taxes on more than one home?
  • Will you be making mortgage payments on two homes?;
  • If sharing ownership, will you be able to work out a shared schedule with your former spouse?; and
  • Will you use the home enough for it to be worth keeping?

Selling the Home

The money you receive from selling your vacation home can compensate both of you for your lost assets and income after your divorce. You will save money on property upkeep and taxes, as well as avoid the headache of figuring out who will keep the home and which other properties you should exchange for it. However, you should not rush to sell your home without considering the consequences:

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Should You Sell Your Wedding Ring After Your Divorce?You have a sentimental and monetary decision to make in regards to what you should do with your engagement and wedding rings after your divorce. There are three options:

  • Sell the rings;
  • Keep the rings; or
  • Give the rings back to your former spouse if he or she gave them to you.

Studies have found that Americans spend more than $6,000 on average for an engagement ring, and that average may be more than $8,000 in Illinois. Thus, the fate of your rings is highly valuable to you and your former spouse.

Selling the Rings

Illinois courts consider engagement and wedding rings to be gifts between spouses, which means they are separate from marital property. As the owner of the rings, you have the right to sell them and keep all of the proceeds. A premarital agreement could create an exception if the agreement states that you must either return the ring to the original purchaser or share its value as marital property. The value of your rings can still affect your division of property, even if they are not part of the marital property. The court has the discretion to compensate a spouse in the division of property if the other spouse has significant nonmarital properties.

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Posted on in Premarital Agreement

Determining If You Need a Premarital AgreementFor all of the work that goes into creating a premarital agreement, you want to feel assured that your effort was worthwhile. Premarital agreements settle the same division of property issues as a divorce, which requires accounting for your individual properties and debts. You may feel uncomfortable discussing the possibility of divorce before you have married. Not every marriage needs a premarital agreement. However, you should weigh the potential benefits of an agreement before dismissing the idea because it is at least worth a discussion.

Financial Protection

A premarital agreement is most useful when the parties own several properties from before their marriage. In the agreement, you can:

  • Differentiate between marital and nonmarital properties; and
  • Determine which marital properties you will receive in case of a divorce.

The agreement will protect your ownership of key assets, such as your business interests and retirement benefits. An agreement can still be useful if you have not accumulated many premarital assets. Your spouse may have premarital debts, such as student loans, which you may share responsibility for during your marriage. A premarital agreement can separate the debts you are each liable for in case of divorce.

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