Is My IRA Account Subject to Division in My Divorce?

In Illinois, the division of assets during a divorce is governed by the Illinois Marriage and Dissolution of Marriage Act (IMDMA). If you are contemplating divorce, you may be wondering whether your Individual Retirement Accounts (IRAs) or other retirement assets are subject to division in the final Marital Settlement Agreement. The answer depends on whether your IRA is classified as marital or non-marital property. Marital assets are split in a divorce, while non-marital assets are not. So, how do you know whether your IRA is marital or non-marital?

Marital vs. Non-Marital Property Under Illinois Law

Section 503 of the IMDMA (750 ILCS 5/503) outlines the classification of property:

• Marital Property: Includes all property acquired by either spouse during the marriage, except property acquired by gift, legacy, or descent, or excluded by valid agreement.
• Non-Marital Property: Includes property acquired before the marriage, property acquired by gift or inheritance, property acquired in exchange for non-marital property, and the increase in value of non-marital property.

How Illinois Courts Divide Marital Property

Once property is classified as marital, Illinois courts divide it equitably in a divorce, considering factors such as:

• The economic circumstances of each spouse.
• The contributions of each spouse to the marriage, including the work of raising children.

Equitable distribution does not necessarily mean equal distribution. Courts aim to divide property in a manner that is fair, given the circumstances of the parties.

How to Classify Retirement Accounts

IRAs and other retirement assets can be either marital or non-marital property:

• Non-Marital IRA: If an IRA was established before the marriage and no contributions were made to it during the marriage, it may be considered non-marital property.
• Marital IRA: If contributions were made to the IRA during the marriage, or if the IRA was established during the marriage, it is generally considered marital property, or partially marital property.

The burden of proof lies with the spouse claiming the IRA is non-marital. They must provide clear and convincing evidence to support this claim.

Case Study: In re Marriage of Robbins, 2024 WL 49886807 (Ill. App. 3d Dist.)

In the case of In re Marriage of Robbins, the husband, Edward, held a Roth IRA that he opened years before his marriage to his wife, Leslie. At the time of the marriage, the account held about $80,000. Edward claimed that during the marriage, he did not make any contributions to the IRA, but he could not provide the Court with account statements for every year of the marriage. For the missing years, he provided handwritten tax worksheets, which the trial court held did not meet Edward’s burden of “clear and convincing evidence.”

At the time of the dissolution, the account had grown to about $480,000. The trial court found that Edward failed to provide sufficient evidence to show that he had never made any contributions to this account during the marriage. For this reason, the trial court classified the IRA as marital property and divided it between the parties 55%/45%, with Leslie receiving the greater portion. Edward appealed.

The appellate court reversed the trial court’s decision. It held that Edward did actually meet his burden of tracing the IRA as non-marital property by providing the documents he had available as well as providing his uncontradicted testimony during trial that he did not make any contributions to the IRA during the marriage. The appeals court held that the IRA was Edward’s non-marital property, and thus not subject to division in the divorce judgment.

This case underscores the importance of maintaining comprehensive financial records and providing clear evidence when claiming an IRA as non-marital property in a divorce. If you want to prove that your retirement account is non-marital, then you will need to show it was opened prior to the marriage and you did not make any contributions to it during the marriage.

Practical Guidance for Individuals with IRAs

Before or During Divorce

• Maintain Detailed Records: Keep comprehensive records of all IRA statements, contributions, and conversions.
• Avoid Commingling Funds: Ensure that non-marital IRA funds are not mixed with marital funds.
• Consult a Financial Expert: Engage a financial expert to assist in tracing the origins and contributions to the IRA.
• Present Clear Evidence: Provide clear and convincing evidence to support your claim regarding the classification of the IRA.
• Understand the Burden of Proof: Be aware that the burden of proof lies with the spouse claiming the IRA is non-marital.
• Seek Legal Counsel: Consult with an attorney experienced in family law to navigate the complexities of property division.

Reach Out to Experienced Divorce Attorney in Chicago

The classification of a retirement account as marital or non-marital property significantly impacts its division in a divorce. Illinois law requires clear and convincing evidence to support claims of non-marital property. Anyone with an IRA should maintain detailed records and provide evidence to support their claims that the IRA is not a marital asset. If you have questions about how your retirement assets will be divided in your divorce, you should consult with a skilled family law attorney in Chicago right away. The lawyers of O. Long Law, LLC, are standing by and ready to help.