Protect Assets From Marriage-Related Complications
Virtually no one starts out in marriage planning for divorce or serious marital strife. Nonetheless, prenuptial agreements (prenups) are common. A prenup is a realistic consideration, especially when high assets and/or children from previous relationships are part of the picture before marriage.
Many thoughtful individuals and couples decide to create prenups to protect businesses, family cottages, investments and other property that could be difficult to divide in case of a divorce. With or without a prenup, comprehensive asset protection planning should take into account the potentially harmful effects that a divorce or bad marriage could have on businesses, investments or other high-stakes assets.
At Reed Law, PLC, we advise clients on how to clarify ownership of assets and protect assets such as businesses regardless of the state of their marriages. We work with individuals or couples, according to clients’ preferences. Protecting Assets from a possible Divorce takes planning.
We look at simple planning strategies to protect pre-marital assets from a potential future divorce.
Understanding Marital Versus Separate Property
In case of divorce, Michigan is not a community property state. Rather, its laws prescribe equitable distribution of marital property. Property division may not mean a 50-50 split of assets. Marital property includes income and assets received or earned by either spouse during the marriage. Separate property, on the other hand, consists of property that each spouse owned before marriage, as long as it is not commingled with marital assets. Inheritances are also generally counted as separate property.
But what about separate assets that are commingled with marital assets? For example, one spouse may have owned a house before marriage but afterward, both contributed to mortgage payments and other costs, such as taxes, insurance, repairs and improvements. Over time, it may be difficult to determine how much of its value, if any, remains separate. If the house is retitled to include both spouses’ names, it may be marital property regardless of the financial history. Building a plan is essential to future security and may save tens of thousands of dollars in future legal costs.
Protecting Assets Through Comprehensive Planning
Beyond prenups, other asset protection methods can help prevent confusion and financial ruin for either or both spouses in case of estrangement or divorce. Common tools for protecting assets during a marriage – even a troubled marriage – and in case of divorce include:
- Carefully designed property ownership structuring
- Utilizing properly owned and managed Limited Liability Companies and Limited Liability Partnerships
- Business plans that take into account the possibility of death or divorce of one or more owners
- Off-Shore Planning
- Domestic Asset Protection Trusts
- Specialized Life Insurance Programs used to protect family wealth
To arrive at the most effective asset protection plans that protect both spouses’ interests while acknowledging theoretical future divorce or marital troubles, consult with an attorney. At Reed Law, PLC, we have helped many clients plan for worst-case scenarios while also building toward best-case family and financial outcomes.
Examples Of Asset Protection In Divorce
One of the most important ways to avoid financial trouble in divorce is to prevent fighting over assets that can rack up legal bills for one or both of you. Protect your savings even if this means giving up some possessions you might have wanted to keep.
Consult with an experienced attorney to discuss the following actions that can help you protect your assets:
- Review your prenup in detail, if applicable
- Take advantage of legal safeguards already in place, such as a family trusts and Limited Liability
- Inventory all assets and debts and determine which assets can be divided without disagreements and which debts can be settled or allocated smoothly
- Focus your attention and your lawyer’s time on problematic assets, such as stocks and property held together with your spouse
Individual circumstances vary greatly. Even if divorce is still just a possibility, get legal advice to get a plan of action in mind for protecting the assets that mean the most to you.
A Couple Of Questions About Asset Protection And Divorce
Bring your questions such as the following to your asset protection lawyer’s attention for personalized guidance.
Can you keep items such as vehicles, jewelry, gold bars or expensive tools by giving them to a sibling or cousin before your marriage dissolves?
Beware of trying to hide assets without getting proper legal advice before or during a divorce. For example, if you decide to give valuable collectibles to a sibling or cousin to avoid losing it in a divorce, this tactic should backfire. A forensic accountant may discover the transaction and your divorce court judge may hold it against you.
What if your or your spouse’s separate property became marital property over time?
Perhaps one of you owned a house before the marriage but then both of you contributed to mortgage payments, taxes, insurance, repairs and improvements. A forensic accountant’s help may be necessary to determine how much of the home’s equity, if any, can still be considered separate property. Looking at cash investment or work maybe considered as part of the asset.
We hope to hear from you soon as you consider how to take potential marital issues into account when planning how to protect your assets.
Begin The Asset Protection Planning Process With Marital Factors In Mind
Reach us in Kalamazoo to schedule a consultation with one of our Michigan asset protection lawyers.