Prenuptial Agreement & ERISA: What You Need to Know
A prenuptial agreement is a contract between two individuals before they get married that outlines how their assets and liabilities will be divided in the event of divorce or separation. It is becoming increasingly popular among couples who want to protect their respective financial interests, especially those with significant assets, business interests, or heirs to protect.
However, prenuptial agreements are not as straightforward as they seem, especially if you are covered by the Employee Retirement Income Security Act (ERISA). ERISA governs most employer-sponsored benefits, such as pensions, 401(k) plans, and employee stock ownership plans (ESOPs).
If you and your spouse or future spouse have an ERISA-covered benefit, your prenuptial agreement may affect each other’s rights to those benefits. In addition, the agreement may be subject to ERISA’s strict rules on benefit distribution and survivorship rights.
Here are some of the things you need to know about prenuptial agreements and ERISA:
1. Prenuptial agreements must be carefully drafted to comply with ERISA.
If a prenup affects ERISA-covered benefits, it must be drafted in accordance with ERISA’s rules. ERISA has strict requirements for the distribution of benefits, the designation of beneficiaries, and the waiver of survivorship rights. If these requirements are not met, the prenup may be unenforceable.
2. The prenup may waive or modify ERISA survivorship rights.
ERISA provides for survivorship rights, which means that if a participant dies, their spouse is entitled to certain benefits unless they waive these rights. If the prenup modifies these rights, it must be done in accordance with ERISA’s requirements.
3. The prenup may affect the distribution of ERISA-covered benefits.
If the prenup modifies the distribution of ERISA-covered benefits, it must be done in accordance with ERISA’s rules. ERISA requires that certain benefits be distributed in a specific manner, and any changes to these rules must be done in accordance with ERISA’s requirements.
4. The prenup may be subject to legal challenges.
If the prenup does not comply with ERISA’s requirements, it may be subject to legal challenges. This can be time-consuming and costly.
In conclusion, if you are considering a prenuptial agreement and you or your future spouse has an ERISA-covered benefit, it is important to work with an experienced attorney who understands ERISA’s requirements. This will help ensure that your prenup is valid and enforceable.