The Ultimate Guide to Asset Protection in Complex Divorces

Protecting your wealth is an important task for your financial future, and it is also an essential step in securing your assets should you enter into a divorce. Marital property is often distributed equally, but determining what can be considered marital property is often difficult. Even more challenging can be the issue of dividing assets like family-owned businesses, stocks, and investments.

If you have considerable assets and are facing divorce, you need the assistance of an experienced high-asset divorce attorney to help you navigate the complex law that governs asset distribution. The team of family law attorneys at Pinkham & Associates welcomes the opportunity to work with you and ease the stress of the divorce process.

The Difference Between Marital Property and Separate Property

It is not uncommon for couples to argue about assets and how they will be divided in a divorce. Legally, there are two types of property in a marriage: marital property and separate property.

Marital Property

Any asset obtained after two people marry may be considered marital property. This includes bank accounts, real estate investments, and even salaries and bonuses. Even if one spouse is the primary earner, that spouse’s salary is still considered marital property meaning both spouses are entitled to a portion of it.

In a divorce, marital property is usually divided evenly, or an agreement is made about how much each spouse will retain.

Separate Property

Separate property includes assets that one spouse brought into the marriage or is given as a gift or inheritance during the marriage (provided that said gift or inheritance is only given to them and not the other spouse). Separate property is not typically divided between spouses during a divorce. For instance, if one spouse owns a rental property before getting married, that same spouse will keep the rental property after the divorce.

If one spouse receives an inheritance in their name only while married, the other spouse will not have access to that inheritance during the divorce. Just because property is marital or separate does not mean it has to be equally divided or kept individually. Both spouses may agree to allow one spouse to keep marital property or split separate property if those terms are agreed to in a divorce proceeding.

Make a List of All Assets You and Your Spouse Own

The task of separating your assets may feel overwhelming. If you are concerned that your marriage may be in jeopardy, it is imperative to take action to protect yourself and your assets.

During a divorce, spouses may become angry and vindictive, attempting to take assets from one another for which they have no legal claim. Avoiding this starts with making a list of all assets you and your spouse own. Consider the following:

• Cryptocurrency investments that you and your spouse purchased together or with a joint bank account
• Real Estate, including rental properties, timeshares, land, and your marital home
• Investment accounts shared by both parties. Stocks, bonds, options, etc.
• 401(k) plans and IRAs both in your name and your spouse’s name
• Bank accounts, including checking accounts, savings accounts, HYSAs, and money market accounts
• Vehicles owned by both parties that were either owned and titled by both parties or purchased during the marriage
• Retirement accounts in addition to 401(k) plans
• Pensions given to either party after retirement
• Businesses, including equity in the businesses and/or sales proceeds

For each item, estimate a value to the best of your ability. If possible, consider hiring a financial professional to help you assign a value to each asset. Pinkham & Associates works with financial professionals, including business valuators and CPAs to establish values of investments, businesses, and other fluctuating accounts.

Consider a Prenuptial or Postnuptial Agreement

If you are not yet married and have a significant amount of assets compared to your spouse, considering a prenuptial agreement is a good idea. A prenuptial agreement is also helpful in protecting one spouse from incurring the other spouse’s debt. Even though a prenuptial agreement does not change the delineation of separate property and marital property, it can reduce the stress associated with divorce by making it clear what kind of spousal support and financial responsibilities will be available.

Prenuptials may also dictate how debt will be divided if a divorce should occur. Unlike a prenuptial agreement, a postnuptial agreement is entered into after a couple has married.

Let’s say two people marry with modest incomes, but end up amassing a considerable amount of wealth. Along the way, the couple may also have children. The couple may wish to sign a postnuptial agreement that allows them to address their new financial situation, outline plans for child and spousal support, and/or place parameters on how financial responsibilities will change in a divorce situation.

Postnuptials also give couples the ability to make changes to previously agreed-upon financial documents.

You Can Start a Limited Liability Company (LLC) to Separate Business and Personal Assets

Another way to protect your assets is by transferring them to a limited liability company, or LLC. An LLC is an entity that provides liability protection for its owner. As such, the assets you place in control of the LLC are harder for creditors and ex-spouses to obtain. It’s important to fully understand LLC law and have your LLC properly organized to ensure it can successfully protect your assets.

At Pinkham & Associates, we can help you set up an LLC and organize it so that it not only helps you with asset protection but also gives you the best possible tax benefits as well. Our attorneys work with numerous financial professionals to ensure that the structure and protection of your assets are not only secure but also benefit you the most.

You Can Start an Asset Protection Trust

An asset protection trust can help protect your assets by taking them out of your control. This may sound counterproductive, but for long-term investments, family wealth, or assets you will want to leave to your heirs this is an excellent option.

A person will set up an asset protection trust and name someone other than themselves as the trustee and/or beneficiary. If you need access to the assets in the trust, you’d need to request it.

Depending on how the trust is set up, you may or may not have that option. Asset protection trusts are like a shield against creditors, spouses, and anyone else who might attempt to come after your wealth.

An even bigger way to safeguard an asset protection trust is to create one offshore. When an asset protection trust is created offshore, it is no longer in the jurisdiction of the United States, making it even more difficult for creditors or spouses to gain access to the assets it protects. These trusts are incredibly effective tools for keeping certain assets out of anyone else’s hands and ensuring that your wealth is distributed to the people whom you designate when you choose for them to have it.

Keep Records of Any Gifts or Inheritance Funds You Receive

Gifts and inheritance funds that you are given while you are married belong solely to you and not your spouse, provided that your spouse is not listed as a recipient of these gifts. If you inherit or are gifted an asset, it is essential to document the gift and keep statements, accountancy, valuations, Notices of Assessments, letters, and receipts associated with the transfer of the asset to your name. Should a divorce occur, you may be required to prove that the asset was indeed gifted to you or inherited by you and not your spouse so that you can legally retain it.

If you are given a gift or inheritance, speak to a qualified attorney to discuss the best ways to protect it while you are married.

Do Not Hide Your Assets

The legal resources available to help protect your assets are numerous. If you work with a qualified attorney, you can make certain that your assets are protected without feeling the need to hide them. It is illegal to hide your assets during a divorce, so taking steps now to keep your assets protected is the best way to avoid unnecessary stress and potential negative legal impact during a divorce.

If a judge discovers that you have attempted to hide an asset during a divorce, you may be ordered to pay your ex-spouse’s legal fees or ordered to pay a higher amount in alimony. In addition, the judge could find you in contempt of court and even levy criminal charges against you.

If you are worried your marriage may be in jeopardy, do not attempt to move your assets without telling your spouse. Instead, contact a qualified family law attorney and ask how best to proceed to legally protect your assets.

Do Not Empty Your Joint Accounts

Joint bank accounts shared by you and your spouse belong to both partners. When a divorce is looming in the distance or when proceedings have already begun, one spouse may be tempted to panic and drain joined bank accounts of all available funds, leaving the other spouse with no access to the money that belongs to them. This act is illegal and carries financial consequences.

Most family law attorneys advise couples in a divorce to leave shared accounts alone and open new, separate bank accounts. This can dramatically reduce the amount of headaches associated with locating funds and determining how much of the account belongs to whom. Sometimes, the court will issue a financial restraining order that dictates that joint accounts cannot be touched during divorce proceedings until it has been decided how they will be separated.

If you attempt to drain an account, you will be held legally accountable, even if you attempt to move those funds to an investment portfolio. Before you touch the money in the account, speak with a reputable divorce attorney to understand how best to proceed.

Talk to a High Net Worth Divorce Lawyer Today

Your assets are your own, and protecting them for your future use, and the use of your heirs is important. Although no one wants to think their marriage may end in divorce, it is important to plan for the unexpected.

No matter where you are in the process of asset protection, Pinkham & Associates can help. Our team of experienced attorneys handles high-end divorces as well as estate planning, prenuptial, and postnuptial agreements. We can handle all aspects of your asset protection to help create a financially safe space in which your marriage can thrive.

To schedule a consultation, contact us today.