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Here's what happens to your pension when you divorce

Divorce can be a difficult process for any couple. It can be even more complicated if it happens later in life, there are unequal financial circumstances and a spouse's pension comes into play.

Pensions have become increasingly less popular than divorce in recent years. Statistics published by the Centers for Disease Control and Prevention (CDC) in 2002 revealed that 20% of marriages were likely to end within the first five years. That same data showed that 33% of marriages were likely to be dissolved within the first 10 years. Those statistics also show that only 18% of private-sector employees have pensions. At least 35% of them did back in the 1990s.

Whether a spouse is entitled to a portion of your pension when you two divorce is a complicated question. A pension, like most assets, is generally considered as a marital asset. So too are 401(k)s and Individual Retirement Accounts (IRAs).

A pension that a spouse earned before getting married is generally considered to be that spouse's individual property. Any pension that a husband or wife earned during the marriage is classified as a marital asset.

Laws regarding how pensions are handled vary by state. Illinois is an equitable distribution state. This means that a pension generally is divided up straight down the middle. A family law judge will generally take into account what type of pension is involved and when the spouse earned their income before deciding how to split up such a plan.

The Employee Retirement Income Security Act of 1974 (ERISA) was created to protect pension holders and their assets. The Retirement Equity Act of 1984 protects spouses' interests in the event of death or divorce.

A spouse generally needs to initiate a Qualified Domestic Relations Order (QDRO) to stake a claim to a portion of their spouse's pension. This must be done while the divorce is pending instead of when a husband or wife is retiring.

Your Illinois judge will ask you many questions before determining what's an equitable distribution of your pension in your Illinois case. You and your divorce attorney may be able to negotiate down how much of your pension that your ex receives. Your Rockford lawyer can also come up with other settlement options in your case that may allow you to hold on to your entire pension and simply give away other assets to your ex as well.

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