It is becoming more and morecommon for a marriage to start with an agreement; and we are not talking aboutthe type of cake served at the reception. Nowadays we are seeing an rise inpre-nuptial or even post-nuptial agreements before anyone walks down the aisle.If you are considering this type of prerequisite, make sure you understand themand plan accordingly â€¦ or risk an unexpected backfire down the road.
Specifically, and in light ofthe recent case of Mid-AmericanPension v. Michael Cox, it is important to appreciate that IRAs and otherspecific assets with named beneficiaries and separate legal designations arejust tricky when it comes to any legal planning. More to the point, pre-nuptialor post-nuptial planning for these assets can be risky, as highlighted in a recent article in The Slott Report titled â€œUsing Post-Nuptial Agreements for EmployerPlan Benefits is Risky.â€
In the case of Mid-AmericanPension v. Michael Cox, a husband and wife came to an agreement and signeda post-nuptial agreement promising to disclaim any right to the otherâ€™s assetsin 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), butnever succeeded because he passed away before the proceedings could beconcluded. All the same, Mrs. Cox was supposed to disclaim everything,including his IRA, but that did not happen. The parents of Mr. Cox were theintended and designated beneficiaries of their sonâ€™s IRA.
When the not-yet-ex-wife and herin-laws went to court, Mrs. Cox prevailed because the proper protocol fordisclaiming 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 formfrom the plan provider would be necessary in this instance.
IRAs and pensions are one thing, but they are not theonly assets to consider when entering into a pre-nuptial or post-nuptialagreement. Follow the â€œcarpenterâ€™s ruleâ€ and measure twice and cut once. Thereare few do-overs if the time ever comes when the agreement must be enforced.
For more information on this and otherestate planning subjects, contact IdahoEstate Planning and schedule aconsultation. Remember,good planning is no accident.