Marriage grants a couple a set of rights and responsibilities predetermined by law with regards to each other. Divorce, also known as dissolution of marriage, involves an often-complicated process of canceling or reorganizing the legal duties and responsibilities that sprung out of the marriage. Issues such as child custody, distribution of property, and alimony can often be a source of stark disagreement. Divorce continues to be quite prevalent in the United States, fortunately, there are steps you can take ahead of type to prevent a divorce from becoming a catastrophe for you and your wealth.
Generally, in a divorce, the couple will have to distribute property and debts between them. The family courts will supervise the division of the marital property, meaning property acquired during the marriage. This includes assets such as real estate, bank accounts, personal property, etc. How a court will carry out this distribution depends on where you live, and whether it is an “equitable distribution” or a “community property” state.
The process of estate planning involves drafting a plan to determine what will happen in case of incapacity or after you pass away. But what about protection in case of a divorce? In this article, we will discuss important planning and asset protection strategies that can anticipate many of the important challenges and decisions that come up during a divorce.
The demand for prenuptial agreements in the United States has increased in recent years, mainly driven by wealthier and more sophisticated millennial couples getting married. Naturally, a premarital agreement is only an option if you are not yet married. If you are already married, but not contemplating a divorce, and would like to have a plan in place just in case it does happen, discussing a post-nuptial agreement with your spouse could be an important first step. A post-nup is best suited for situation when you intend to stay married to your spouse but would like to clarify what would happen to your assets in case a divorce was to occur. If you do not have a valid prenuptial or post-nuptial agreement in place, the default laws of the state would apply in the event of divorce, such as the rules regarding the division of property, retirement benefits, savings, and alimony.
While a pre-nup or post-nup can help establish guidelines in case of a divorce, there are other more effective asset protection strategies that can provide a higher level of protection in case of divorce. If you have sufficient assets that you would like to safeguard, you might want to consider a more powerful asset protection solution such as an offshore trust or a Titanium Trust. While some firms might also recommend a domestic asset protection trust, the caselaw for these types of trusts is less than favorable, particularly in case of a divorce.
Simply stated, a divorce, particularly a contested divorce, is a legal proceeding not unlike other types of lawsuits. Asset protections trusts are designed to protect against lawsuits by providing a legal separation between you and any assets held in trust. An asset protection trust is an irrevocable trust, which means for legal purposes, any assets placed in the trust have already been gifted to a third party, or at least placed under the management and control of a third party. An asset protection trust can be used to give your assets to your children, other family members, or even keep yourself as a beneficiary.
When an asset protection trust incorporates offshore elements such as an international trustee, it can make the trust assets inaccessible to a court in the United States. Mile High Estate Planning has years of experience setting up these types of trusts for clients all over the U.S. We are able to offer asset protection solutions which provide the highest levels of legal security available in the world, using defendant-friendly jurisdictions such as the Cook Islands and Saint Kitts and Nevis. These nations offer unparalleled levels of protections from legal threats, including divorce proceedings.
As is the general case with asset protection, these strategies work best when implemented well in advance of any legal proceeding. However, even if a divorce summons seems imminent, it might not be too late to consider these powerful asset protection solutions.
If you already have an estate plan in place and are worried about a potential divorce in the near future, it might be the right time to review and revise your existing documents. If your estate plan was drafted years ago it most likely names your spouse as beneficiary, executor, and power of attorney. Simply filing for divorce will not necessary make all of these documents void, so it is important to consult with an attorney to ensure your estate planning documents continue to match your wishes both during and after the divorce is finalized.
Importantly, you will want to update your power of attorney to prevent your spouse from having unrestricted access to your financial accounts in the event you are incapacitated. Most likely, your Last Will and Testament will need to be updated as well. If you signed and funded a joint revocable living trust with your spouse, this agreement will likely need to be cancelled and the assets disgorged. It might be useful to setup an individual revocable living trust instead. Just as important, you will want to review the beneficiary designations on all your financial accounts. Failing to do so in time could have serious unintended consequences and result in costly litigation.
The attorneys at Mile High Estate Planning are experts when it comes to protecting clients’ wealth from a variety of legal disputes. We are proud to offer a variety of legal solutions that can help safeguard your assets in case of divorce or other legal issues. If you would like to discuss whether divorce protection plan is right for you, please contact Mile High Estate Planning to schedule a free, no-obligation consultation.