Can I Protect My 401k with a Prenup?

A prenuptial agreement is a legal tool that helps couples determine how their assets will be managed if their marriage ever ends in divorce. While the law does draw the line in some areas about what you can and can’t include in a prenup agreement, you are permitted to include your 401k account within your prenup. In fact, a prenup is the easiest way to protect your 401k in the event of a divorce.

Property Division in Maryland Divorces

Prenuptial agreements aren’t just for the rich and famous anymore. Instead, they are practical and valuable instruments that couples can use to identify how their finances will be handled during their marriage and in a divorce. These legal agreements typically establish what is considered “separate property” (which won’t be divided up in a divorce) and “marital” or “community” property (which will be divided in a divorce).

Without a prenup in place, asset division in a divorce occurs according to Maryland family laws. First, all assets, including retirement accounts, bank accounts, cars, real estate, jewelry, and art, are identified as either separate or marital property. Typically, the marital property belongs to the marriage and includes everything the couple acquired together during their marriage. Separate property includes gifts or inheritances received by one spouse or property owned by one spouse before the marriage occurred.

In divorce, separate property is protected, and each spouse keeps their own. But on the other hand, marital property is subject to equitable property division. Under this premise, the family court judge must divide marital property equitably, not necessarily equally, between the two spouses.

How Do Prenups Protect 401k Accounts?

If you fail to draft a prenuptial agreement, you stand to lose part of your 401k to your spouse in a divorce. Usually, any monies in the 401k are considered marital property and, therefore, subject to equitable property division. For example, the judge presiding over your case can decide that half of your 401k should go to your spouse. Depending on the size of your 401k, it is a significant asset, and half of it is a lot to lose.

However, you can specify within your prenup that your 401k will be considered your separate property if the marriage ends in divorce. You also have the right to stipulate that any contributions you make to the account while you are married will be considered separate property. Under most circumstances, if you don’t specify these requirements, your 401k funds will be included as a marital asset to be allocated between the parties. In that case, your soon-to-be ex-spouse will be entitled to receive a portion of your 401k.

Protect Your 401k by Speaking with a Skilled Prenuptial Agreement Attorney Today

No matter how much money you do or don’t have in your 401k when getting married, it’s wise to protect it and your other assets with a prenuptial agreement. To learn more about how these agreements work and what they can do, speak with a skilled prenuptial agreement attorney today. They can help you understand your rights and options so that you can make the best decisions for you.

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