If you want to protect your retirement funds during your marriage, it’s not difficult to do but you have to be proactive. The average cost of divorce is astronomical and it doesn’t even include what you lose when you split up your IRAs and 401ks. That’s why it’s so important to take these steps.
In the State of New York, at least, the court ruled that a properly written prenup is valid even if the federal Employee Retirement Income Security Act (ERISA) says it may not be.
This is important for two reasons:
a. Retirement accounts might be the biggest asset you have.
b. Your chances of going through a divorce are 50-50 these days.
That means it really makes sense to do whatever you can to protect these assets from your spouse or other creditors. First, make sure you and your spouse sign a prenup. This should be done at least a month before the wedding. This way, it’s less likely to be viewed as coerced. Also, your spouse must sign a waiver that disclaims any rights to the retirement money.
The trick is to have the spouse do this a week or so after the wedding. Under ERISA, only a spouse can waive the benefits to a qualified retirement plan. If you rely only on the prenup, you are going to be sadly disappointed.
You can either use attorneys to draft these documents or use a service like LegalZoom.
If you were going to get married next month, would you ask your future spouse to sign a prenup and then a disclaimer? Why or why not?
Michael @ The Student Loan Sherpa says
June 17, 2013 at 5:48 PMMaybe I am just a romantic, but even as an attorney, I still don’t think I would ever sign a prenup. Even if the math says its 50-50, life cant always be about playing the numbers.
Neal Frankle says
June 17, 2013 at 9:44 PMI understand you Michael. I don’t know if I could do it either. It was easy when I got married because we didn’t have a thing. But having said that, I’ve seen so many horror stories that it bears thinking about.
Neal says
June 3, 2010 at 12:18 PMI like that concept of “insurance policy”. I’ve been searching for a term like that and you just provided it. Thanks!
Christine says
June 2, 2010 at 1:26 PMI happen to have more assets than my boyfriend (right now), so a prenup would be to the wife’s advantage in our case.
We’ve agreed to have one, should we make it that far. It was my idea, and he wasn’t crazy about it at first. I told him to think about it like an insurance policy: you might never use it, but just in case. Besides, the time to decide these things is when everyone feels like being fair.
Funny about Money says
June 1, 2010 at 5:36 AMA woman would be crazy to give up her rights to community property…for that matter, so would a man. In a community property state, all earnings and property acquired during the marriage are equally shared by both partners. Men benefit from this as well as women.
In one divorce that I know of, the part of the spouse’s retirement fund that had been earned BEFORE the marriage was regarded by the court as sole and separate. Earnings that accrued after the marriage were split 50-50.
@ Thisiswhyubroke: I need a wife. Tell you what: come on over to my housem — you can be the stay-at-home spouse and I’ll run down to the office and earn the living. Of course, you’ll keep the house clean, keep up the yard and pool, do minor repairs and maintenance, raise the kids, schlep them to school and extra-curricular activities, see to it that they learn to read, write, and do math, feed them, take care of them when they’re sick, do all the grocery and clothing shopping, manage the budget, have a decent meal on the table when I get home from work, be dressed and groomed so as not to present me with an eyesore when I come home, be prepared to entertain my clients and business partners at the drop of a hat, and look like a million dollars when I have to take you out in public. Oh, and incidentally…I expect to be entertained in bed each night — no excuses. And get your lazy butt off the sofa!
Financial Samurai says
May 21, 2010 at 6:49 AMHow about run away to Mexico and never get married? 🙂
Angela called you “shady” … love it!
angela says
May 20, 2010 at 7:18 PMNo I wouldn’t sign a pre-nup. As a full-time stay at home mom, I would think that sacrificing my career for the past 9 years to raise our children, would entitle me to 1/2 of our assets. I can’t imagine why I shouldn’t expect retirement savings that were earned from our “married income”. If I had been working all this time, then still, our contributions should be able to be split up.
Seems a little shady over here at Wealth Pilgrim. I’ll be sure not to stop by again.
Thisiswhyubroke.com! says
May 22, 2010 at 11:36 AMLOL @ Shady. Man o man do these women have the game twisted.
If someone is paying your room and board, car note, hair weave payments etc, thats called a FREE RIDE. YOU chose to be a stay at home mom for your own reasons. Noone forced you. Ontop of that you’re going to act like you didnt get your lifestyle paid for all of those years and now want half of the assets from the person who PAID for your laziness? Come on…
http://thisiswhyubroke.wordpress.com
“Because credit crack is WACK”
Nunzio Bruno says
May 20, 2010 at 1:06 PMI’ve seen this happen a few times to people that have come through my doors. It’s can be sad (or happy) when a relationship ends but the tragedy is the financial set backs that can erupt. Some people might see this as being heartless but pre-nups and waivers like this can be important in protecting assets especially if there are children involved (now and new children after splits from new relationships) and intentions on passing wealth down specific lineage strands.
Neal@Wealth Pilgrim says
May 20, 2010 at 4:39 PMI couldn’t agree w/you more Nunzio