Attorneys advise Fort Bend County clients to think carefully before signing divorce agreements. Property division can be complex, especially when spouses’ desires conflict with rules governing the separation of retirement benefits.
Marital rights and terms of certain retirement plans can shut down attempts to demote spouses as beneficiaries. The 8th U.S. Court of Appeals recently decided that a postnuptial agreement did not have the strength to override a spouse’s right to benefits from her husband’s 401(k) plan.
The woman who walked away victoriously from a federal appeals court had signed a postnuptial contract after marrying the same husband three times. Unfortunately, the third time was not the charm. As the couple proceeded toward another divorce, the husband died.
The contents of the postnuptial agreement stated each spouse “irrevocably” agreed to give up beneficiary rights to each other’s retirement plans. Prior to his death, the husband removed his spouse as beneficiary on a 401(k) plan and substituted the names of his parents.
The couple was married when the husband died. The wife felt she deserved her almost-ex-husband’s retirement benefits, despite the change in beneficiaries. A district court agreed and was backed by the federal appellate court.
The federal Employee Retirement Income Security Act, which safeguards private pensions for workers and beneficiaries, states surviving spouses are entitled to benefits unless waived. The wife never signed the required waiver that would have directed the plan’s administrator to make that change.
The courts determined the 401(k) provision of the postnuptial agreement did not let the wife know she had benefits’ rights as a spouse or that she was forfeiting those rights. It is not certain what the court would have decided if the couple’s divorce was finalized.
Valid marriage and divorce agreements cannot be unclear or conflict with established laws. If you have questions regarding a prenuptial agreement or divorce settlement, contact a Texas family law attorney to discuss your case.
ebn.benefitnews.com, “Appeals court holds prenup doesn’t waive spousal rights to 401(k)” Donald Jay Korn, Jul. 31, 2013