Divorce can have devastating effects on your life. Although you may not have thought that your marriage could end in a divorce, it could end that way because of several reasons. One of the contentious issues that arise following a divorce is the sharing of assets of properties. Putting safeguards in place can help ensure that your assets go where they should in case of a divorce. This article presents a brief explanation of how to protect assets from divorce.
How to Protect Assets From Divorce
While divorce is one of the most common lawsuits in the United States, the process is often highly contentious. Depending on what is at stake, the process can be both emotionally charged and mentally draining. Some divorcing spouses can be impulsive, angry, or even spiteful. It is also not uncommon for a spouse to destroy, deplete, or hide marital property or funds acquired during their marriage to prevent equal division. To protect your assets from divorce, you need to be proactive and develop a solid asset protection strategy.
1. Identify The Property You Own and Your Spouse’s
Once you come to terms that divorce is imminent and your marriage is coming to an end, record a comprehensive inventory of all the property that you own and what your spouse owns. This includes totaling all jointly owned property, determining the money in your accounts, calculating your net worth, and identifying all liabilities and debts. Some of the assets to consider include:
- Primary home or residence
- Personal property
- Shared investment accounts
- Vehicles
- Bank accounts
- Retirement accounts
- IRAs and 401(k)s
- Business equity or proceeds
- Real estate
- Pensions
- Cryptocurrency
Your inventory should also specify separate property, which was acquired before your marriage, and marital property that you both acquired during the marriage.
2. Know the Value of Your Assets
After taking an inventory of your assets, calculate their value. During divorce proceedings, the court will evaluate the amount of property and income level of each spouse before and after the marriage. You may need to hire a personal finance professional for this to get the most accurate valuation.
3. Separate Bank Accounts, Property, and Debt
As you think of how to protect assets from divorce, separate assets and property between you and your spouse. This includes bank accounts, debt, and personal property. Get rid of your joint account and instead open a separate bank account. Make sure all records of your finances and transactions are accurate, and gather necessary financial documents. During court proceedings, the judge may make reference to these records.
4. Understand Your State’s Laws
The laws regarding divorce, community property, marital property, equitable distribution, child custody, and alimony vary across states. You need to familiarize yourself with state laws regarding divorce and asset protection. Consider doing some online research or scheduling a consultation with our divorce property lawyers to guide you on how to navigate the legal aspects.
5. Be Aware of Tax Laws
Failing to consider applicable tax laws and regulations is a common mistake that most divorcing spouses make. In typical circumstances, one spouse would take un-taxed assets like retirement accounts while the other receives tax-free assets. For instance, a husband may receive $50,000 in money from the bank account and brokerage after divorce while the wife gains access to $50,000 in a 401(k). In such a case, the wife is required to pay taxes to withdraw funds, but the husband is not.
6. Change Your Beneficiaries
The next thing you will need to protect your assets from divorce is to change the beneficiaries for your will, retirement accounts, and life insurance. While State laws vary, most exclude former spouses as beneficiaries. You can switch beneficiaries to your children, relatives, or a friend.
7. Consider a Trust to Shield Assets from a Divorce
Equitable distribution laws in divorce determine individual property that is separate from marital property. An asset protection trust is separate property in most states, and this can help you protect it from divorce. The most common types of trusts that you can use to protect your assets during your divorce include irrevocable trust, asset protection trust, spendthrift trust, and offshore trust.
Hire an Asset Protection Lawyer
The best way to protect assets during a divorce is by hiring an experienced lawyer in asset protection. At Schill Law Group, we will guide you on how to protect assets in divorce, ensuring you get the best possible outcome. Our lawyers will help you navigate the process of opening an asset protection trust and other effective ways to safeguard your assets during this stressful time.
