Nobody ever ties the knot with the intent of separating, but the sad fact is that almost half of U.S. marriages end in divorce. In addition to the emotional, mental, and psychological hardships of ending a marriage, there are also financial issues to consider.
At Blake Harris Law, our asset protection lawyers know first-hand how to protect assets from divorce proceedings, even when the situation seems hopelessly tangled. In this guide, we explain how to develop an effective asset protection strategy, the best ways to protect your finances, what to do if your spouse is hiding marital assets, prenuptial agreements, and more.
Divorce is one of the most common lawsuits in the United States, and unfortunately, the process is often highly contentious, emotionally charged, and mentally draining.
Divorcing spouses can be angry, impulsive, and even spiteful. In some cases, a spouse will destroy, hide, or deplete marital funds or property acquired during their marriage to prevent equal division. Being proactive and developing a solid asset protection strategy is critical. Here are the best methods for protecting assets in a divorce:
If your marriage is breaking down and divorce is imminent, start by recording a comprehensive inventory of all the property owned by you and your spouse. Total all jointly owned property, calculate your net worth, determine how much money is in your accounts, and identify all liabilities and debts.
Common assets include:
Separate property is any property acquired before your marriage. Marital property is what you both acquired during the marriage.
The next step you should take when developing an asset protection strategy is calculating the value of your assets. During divorce proceedings, the court often evaluates the amount of property and income level of each spouse before and after the marriage. For the most accurate valuation, consider hiring a personal finance professional.
Another important task is to separate assets and property between you and your spouse, including bank accounts, debt, and personal property. Eliminate your joint account and open a separate bank account instead. Keep accurate records of your finances and transactions, and gather necessary financial documents. The judge may want to reference these records during court proceedings, so keep them on hand.
The laws regarding divorce, marital property, equitable distribution, community property, child custody, and alimony vary from state to state. Familiarizing yourself with state laws regarding divorce and asset protection is a critical step for any spouse. For example, if your state has community property laws (i.e., Texas, California, Washington), you could lose half of your joint property and assets in the divorce.
Separate property doesn’t qualify, but anything deemed marital property is eligible for a 50-50 split. You may want to start with some online research or by scheduling a consultation with an asset protection or divorce attorney in your state.
Many divorcing spouses make the common mistake of failing to consider applicable tax laws and regulations. Typical circumstances would be one spouse taking un-taxed assets (think retirement accounts), whereas the other spouse receives tax-free assets.
For example, after divorce, a husband may receive $50,000 in money from a brokerage and bank account, while the wife gains access to $50,000 in a 401(k). Therefore, the wife would have to pay taxes to withdraw funds, whereas the husband would not.
Next, you should change the beneficiaries for your retirement accounts, will, and life insurance. State laws vary, but the majority excludes former spouses as beneficiaries.
Most people switch beneficiaries to their children, relatives, or a friend. If you have a joint will, hire an estate planning attorney and change it to an individual will.
The best way to protect your cash and property during a divorce is by hiring a skilled attorney with experience in asset protection. At Blake Harris Law, we can teach you how to protect assets in your divorce using our professional knowledge, skills, and experience. Our lawyers will help you navigate the process of opening an asset protection trust, allowing you to safeguard your assets and build a brighter future.
In a divorce, equitable distribution laws determine what property is separate from marital property. Generally, an asset protection trust is separate property, although it depends on the circumstances and state where you are divorcing. You may want to consider one of the following types of trusts to protect your assets during your divorce:
No, you should never attempt to hide money, assets, or marital property before divorce. However, hiding assets is different from protecting assets which you may be able to do. Your ability to do this will depend on your individual circumstances and you should consult an asset protection attorney to see whether this is a viable option for you.
How does a prenuptial agreement protect your property against a potential divorce? First, a prenuptial agreement is a legally binding document describing future asset division and financial distribution in the event of divorce or death.
A prenuptial agreement protects assets each individual owned before the marriage. Property acquired after marriage is considered marital property. The key to effectively protecting assets with a prenup is to be precise, detailed, and specific regarding your wishes in a future divorce.
Another option is to create a post-nuptial agreement, which provides similar protection and has the same general purpose as a prenup. However, a postnup occurs after marriage. Typically, spouses will draft a post-nuptial agreement to update their existing prenup to accurately reflect a significant change in the finances or affairs of either party.
Are inherited assets subject to property division during a divorce? Well, it depends. Each divorce is unique, and U.S. laws vary by state.
Most states view inherited assets—whether you got them before, during, or after marriage—as separate property. Therefore, as long as you don’t commingle those assets with your spouse, they should remain “separate property” and go to you alone when your marriage ends. However, there are many situations where inherited assets can be lost in a divorce so seeking asset protection is wise.
Unfortunately, there’s no simple answer as to which type of asset protection trust is best for your circumstances. Important factors to consider include your state, net worth, future plans, lifestyle, etc.
Many people utilize a Domestic Asset Protection Trust (DAPT), which is an irrevocable trust. Opening an offshore trust is also a common choice as it provides the highest level of protection.
However, each trust has different advantages and disadvantages. To learn more, schedule a consultation with our team at Blake Harris Law. Our team of asset protection attorneys has extensive knowledge regarding asset protection trusts, and we can help you determine which type will best suit your needs.
As professional asset protection lawyers, the Blake Harris Law team is uniquely qualified to help you safeguard your assets from a potential divorce. Helping our clients learn how to protect their assets from divorce is one of the most important aspects of our legal services. Call Blake Harris Law today at (833) ASK-BLAKE to book your initial consultation with our legal team and start building your asset protection strategy.