Under
federal pension law, there are many very strict legal requirements that must be
met when a spouse tries to waive his or her rights to the other spouse’s
retirement benefits. In this case, those rules weren’t met because the
post-nuptial agreement was drafted incorrectly. So because the agreement wasn’t
written properly, the soon-to-be-but-not-yet ex-wife got everything.
It is becoming more and more
common for a marriage to start with an agreement; and we are not talking about
the type of cake served at the reception. Nowadays we are seeing an rise in
pre-nuptial or even post-nuptial agreements before anyone walks down the aisle.
If you are considering this type of prerequisite, make sure you understand them
and plan accordingly … or risk an unexpected backfire down the road.
Specifically, and in light of
the recent case of Mid-American
Pension v. Michael Cox, it is important to appreciate that IRAs and other
specific assets with named beneficiaries and separate legal designations are
just tricky when it comes to any legal planning. More to the point, pre-nuptial
or post-nuptial planning for these assets can be risky, as highlighted in a recent article in The Slott Report titled “Using Post-Nuptial Agreements for Employer
Plan Benefits is Risky.”
In the case of Mid-American
Pension v. Michael Cox, a husband and wife came to an agreement and signed
a post-nuptial agreement promising to disclaim any right to the other’s assets
in the event of divorce. Mr. Cox filed for divorce (this was the third time,
and they had been married to and divorced from each other twice before), but
never succeeded because he passed away before the proceedings could be
concluded. All the same, Mrs. Cox was supposed to disclaim everything,
including his IRA, but that did not happen. The parents of Mr. Cox were the
intended and designated beneficiaries of their son’s IRA.
When the not-yet-ex-wife and her
in-laws went to court, Mrs. Cox prevailed because the proper protocol for
disclaiming an interest in retirement funds was not followed. You see, IRAs,
pensions, and the like have very specific and legally enforced requirements,
and the post-nuptial agreement did not cut the mustard. In fact, a simple form
from the plan provider would be necessary in this instance.
IRAs and pensions are one thing, but they are not the
only assets to consider when entering into a
pre-nuptial or post-nuptial
agreement. Follow the “carpenter’s rule” and measure twice and cut once. There
are few do-overs if the time ever comes when the agreement must be enforced.
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Reference: The Slott Report (August 13, 2013) “Using Post-Nuptial Agreements for Employer
Plan Benefits is Risky”