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How marital agreements play out regarding 401(k)s and divorce

Retirement plans, such as 401(k)s, are one asset that will be addressed in the event of divorce in St. Charles, Missouri. Most spouses are fully aware of how valuable retirement plans are, which is why some people choose to exclude them from the division of property included in marital agreements.

Spouses use prenuptial and postnuptial agreements to protect their 401(k)s from the effects of divorce. However, that is not always possible because the money invested in a 401(k) is considered marital property in most states, including Missouri. That means that retirement plans are subject to property division.

If a marital agreement waives the spouse's right to the retirement plan by naming a beneficiary other than the spouse, a recent decision by the U.S. Court of Appeals for the Eighth Circuit may clear things up for them. This decision stated that in postnuptial agreements where each spouse has stated an irrevocable consent to change the beneficiaries of their retirement plans, this consent cannot waive the other spouse's rights to the 401(k).

The court's decision was based on the Employee Retirement Income Security Act of 1974, a law that manages retirement benefits in private industry. Under this federal law, spouses have the legal right to become the beneficiary of 401(k)s or retirement plans. The spousal rights to retirement plans can only be relinquished if that spouse decides to do so. Also, waiving spousal rights to a retirement plan may go beyond what marital agreements can do.

The court's ruling may have further implications for the significance of prenuptial and postnuptial agreements in divorce. This decision may also affect high-net worth divorces, considering that such cases often involve complex property division due to 401(k)s, business assets and other disputes. Taking this into account, the knowledge of a legal professional may be vital in the case of a Missouri high-asset divorce.

Source: Forbes, "Court Ruling: Postnup Does Not Waive Spousal Rights to 401(K),"Jeff Landers, Aug. 14, 2013

Joseph J. Porzenski
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