When you choose to get a divorce in Peoria, you may be prepared to have to split the value of a number of your assets with your spouse. One of the assets you may not be prepared to share, however, is your 401k. The funds in your 401k are the result of your employment; why, then, would they be considered a marital asset? First off, you should understand that the entire amount of your 401k may not be subject to property division; only the amount contributed to it during your marriage is. Since these contributions are made from your income, they are considered marital property.
In a divorce, the court will typically issue a Qualified Domestic Relations Order that authorizes your 401k administrator to make disbursements to an alternate payee (which would be your ex-spouse). They then can do whatever they please with their portion. Yet what if you are set on keeping the entire amount of your 401k?
The 401k Help Center offers up a potential solution: relinquish your claim to a marital asset of comparable value in exchange for the promise of keeping your entire 401k. This may the easiest way to deal with such an asset, as it avoids having to deal with the potential of tax penalties if disbursements made from your account are not handled properly.
Keep in mind, however, that there are things to consider prior to making such a proposal. One is the overall value you currently assign to your 401k taking into account the tax you will have to pay on future dispersals (remember that taxes on 401k funds are deferred). The second is the amount earned that can be earned in interest and investment returns over time. This should influence how much you should agree to relinquish to keep your 401k.