Prenuptial agreements and retirement savings: what to know
Getting married is a joyful, exciting step for many couples, but it’s also important to consider what would happen if the marriage doesn’t work out. That’s where prenuptial agreements come in. A prenuptial agreement, or “prenup,” is a legally binding contract that outlines how a couple’s assets will be divided in the event of a divorce or separation.
Why consider a prenuptial agreement?
There are many reasons why a couple might consider a prenuptial agreement. For one, a prenup can help protect the assets that each partner brings into the marriage. If one partner comes into the marriage with substantial wealth, property, or retirement savings, a prenup can ensure that those assets remain with that partner in the event of a divorce.
Prenups can also help ensure a fair distribution of assets in the event of a divorce. For example, if one partner gave up a lucrative career to support the other partner’s career or care for children, a prenup can help ensure that the sacrifice is acknowledged and compensated.
How do prenuptial agreements affect retirement savings?
Retirement savings are often among a couple’s most significant assets, so it’s important to understand how prenuptial agreements can impact those savings. In general, prenups can be used to protect retirement savings that were acquired prior to the marriage.
However, prenups can only dictate the distribution of assets that exist at the time of the divorce. If a couple continues to contribute to a retirement account during the marriage, those contributions will likely be considered marital assets and subject to division.
It’s also worth noting that prenuptial agreements can be challenged in court. If one partner believes that the agreement is unfair or was signed under duress, they may try to have the agreement invalidated. For this reason, it’s important to work with an experienced attorney to draft a prenup that is fair and legally binding.
Other considerations for retirement savings during divorce
Beyond prenuptial agreements, there are other important considerations for retirement savings during divorce. For example, it’s important to understand the tax implications of dividing retirement accounts. Different types of accounts, such as traditional IRAs and Roth IRAs, have different tax structures that can impact the value of the accounts.
It’s also important to consider how retirement savings will be divided in the context of other assets. Depending on the couple’s overall financial situation, it may make sense to divide retirement savings in a way that balances out other assets, such as property or business interests.
Conclusion
Discussing prenuptial agreements and divorce can be a difficult, uncomfortable topic for many couples. However, it’s important to have these conversations in order to protect both partners’ interests in the event of a divorce. For couples with significant retirement savings, prenups and careful consideration of how to divide those savings can be especially important. By working with experienced professionals, couples can create a plan that ensures a fair and equitable outcome for everyone involved.