How to Protect Your Financial Assets in a Divorce
Most couples do not enter into marriage thinking it will end one day. However, as the latest figures reveal that 43% of first marriages and 60% of second marriages end in divorce, it is clear divorce is a reality for many.
Unfortunately, it is only at this point that many people realize that divorce does not just involve the separation of two individuals but also their financial assets. From marital homes and joint bank accounts to shared businesses and retirement funds, every aspect of their financial affairs must now come under review.
Dividing these assets can be a complicated and lengthy process that requires both parties to enlist the help of a divorce attorney to represent their interests and ensure their long-term financial security. In this article, we will outline steps couples can take to ensure the distribution of their financial assets can be fairly and efficiently assessed in the event of a divorce.
Prenuptial Agreements
The concept of a contractual agreement outlining a couple’s respective financial position following the dissolution of their marriage may seem unromantic to some. However, in practice, this strategy can avoid financial stress and conflict should they decide to part ways one day.
Rather than allowing the courts to decide how certain financial assets should be distributed in divorce, both parties can decide these matters for themselves by stipulating their terms in writing before their marriage. With finances being a major cause for concern for most couples during a divorce, prenuptial agreements can give couples peace of mind by assuring them of their financial status after divorce.
Create a Trust
Trust structures are another way to protect an individual’s financial assets during divorce. By transferring certain financial assets into a trust, the settlor can safeguard them from creditors such as litigants or divorcing spouses.
A domestic asset protection trust (DAPT) is commonly used to achieve this goal. This is an irrevocable trust in which the settlor transfers assets while still being a discretionary beneficiary. This allows them to benefit from the trust’s assets while shielding them in case of a divorce.
One of the states that offers the best financial asset trust protection during a divorce is Nevada. Unlike some types of DAPTs, which make exceptions for certain creditors like spouses, a Nevada Asset Protection Trust (NAPT) does not allow any creditors to access the trust, enabling individuals to shield their assets during divorce.
Keep Separate Accounts
A divorce can get messy when funds become co-mingled making it difficult to distinguish between separate and marital assets. To avoid these complications it is good practice to keep separate bank accounts for any funds intended to remain as separate property. This might include money or gifts received before the marriage or any inheritances given solely to one party. In addition to keeping these accounts separate, the names in which they were held before marriage should also be maintained to provide extra protection.
This strategy not only streamlines the division of financial assets during a divorce but also reduces the risk of one party withdrawing funds from a joint account or preventing the other spouse from gaining access to them.
For tailored advice on your situation, it is best to consult with a divorce attorney or financial advisor.
