In the latest update from one of Hollywood’s longest-running divorces, Arnold Schwarzenegger has been ordered to split his retirement funds with his ex-wife Maria Shriver. The couple has been in the process of getting divorced for more than a decade.
While Shriver first filed for divorce in 2011, their split wasn’t made official until 2021. Even today, details about how the couple’s estate should be split are still being finalized. The retirement fund decision was only made in June of this year after Schwarzenegger disputed how their estate should be divided.
Disputes over asset division were the reason why the split dragged on for a decade in the first place. The couple had more than $400 million in assets that had to be divided, including multiple homes, vehicles, royalty rights, retirement funds, and pensions. Furthermore, when the couple first split, their youngest child was still a minor, so they had to organize custody and child support orders as well. Between negotiating how to divide their assets and navigating other legal issues, the couple’s divorce took years longer than most Hollywood splits.
The Schwarzenegger-Shriver divorce is an excellent learning opportunity. Whether you’re concerned about protecting your retirement funds or just want to keep your divorce from dragging out, you can study Schwarzenegger’s actions to learn what not to do. Keep reading to learn why California’s former governor will have to split his retirement funds and what you can do to avoid similar issues.
Dividing the Schwarzenegger Estate
Dividing a multi-million dollar marital estate is rarely straightforward, but Schwarzenegger and Shriver did nothing to make it simpler. When the couple first married in 1986, they didn’t get a prenuptial agreement. That meant that when they chose to divorce in 2011, every asset they had acquired in 25 years of marriage was considered community property under California law.
Community property laws state that marital assets are joint property. In a divorce, this property must be divided equally between both partners, regardless of who earned it. The assumption is that the lower-income partner supports the higher-income partner’s career and makes it possible for them to do their work. As such, California law dictates that both halves of the couple get 50% of the marital assets unless a pre-existing contract states otherwise.
This law is why prenuptial agreements are so crucial for high-income couples. When Schwarzenegger and Shriver got married, his film career was already well underway. If he had opted for a prenuptial agreement, the assets he’d earn over the next two and a half decades of film and political work would have been protected. Instead, the couple had no pre-existing contract, so Shriver had the right to $200 million that he earned.
Protecting Your Retirement After Getting Married
Schwarzenegger wasn’t expecting to get divorced, so he didn’t think to put any protections in place on his retirement funds or other assets. You don’t have to make the same mistake. You have options if you’re already married and concerned about your retirement. You can try the following techniques to keep your retirement funds safe whether or not you think you’ll be getting divorced in the future.
Get a Postnuptial Agreement
Prenuptial agreements aren’t the only solution to simplify divorce and asset division. You can write similar legally binding contracts with your spouse even after you’re married. These are known as postnuptial agreements, and they can do everything a prenup can do.
Postnups can help you clarify how investment funds should be split, who owns which assets, and even whether either party is eligible for spousal support. Whether or not you think you may get divorced, a postnuptial agreement can help you clarify who owns what in your marriage. That can help you feel more secure since you know that if you choose to end your relationship, you already know how property and retirement accounts will be split.
Choose Safe Retirement Options
Most pensions, retirement accounts, and investments are considered marital assets if they’re earned during your marriage. That makes them vulnerable to being divided in a split. If you want to ensure you have at least a few accounts that will remain yours, you have two options.
First, you can save for retirement using separate assets. This is property that is not part of your marital estate, whether because you earned it before getting married or inherited it afterward. As long as you don’t combine it in the same accounts as your joint funds, it remains yours. You can set up a separate retirement fund using this money, which will likely stay in your name after a divorce.
You can also consider getting a whole life insurance policy in your name. Certain life insurance policies offer cash value components you can use when you retire. If you keep these funds in your own name and pay for them with separate funds, then they should be yours by default after a divorce.
Consider Creating a Trust
Another way to protect your retirement is to set up an irrevocable living trust. These trusts can’t be dissolved in a divorce. If you name yourself as a beneficiary of the trust, then the trustee is obligated to manage it in your best interest. Just note that these trusts are undissolvable and can’t be easily changed after you’ve formed them. That means you need to design them very carefully so they will accomplish your goals whether or not you get divorced.
Protect Your Retirement Funds from Divorce with Kaspar & Lugay, LLP
Even after splitting his retirement funds in half, Arnold Schwarzenegger still has $200 million to support his golden years. If your retirement funds aren’t quite that robust, it makes sense to protect them from a potential divorce. You and your spouse can put together a postnuptial agreement or a trust to support your retirement no matter what happens to your relationship. Learn more about how to set up these legal structures by scheduling your consultation with the experts at Kaspar & Lugay, LLP today.