Marriages don’t always last forever and can end up in a divorce. Ideally, nobody imagines ever getting a divorce or wishes to, but it is a possibility a person can face. Understanding the fundamentals of the law when it comes to divorce and having plans that guarantee the protection of your assets before marriage is essential. It is crucial to avoid financial stress in addition to other challenges you are likely to be facing when divorce happens. Your biggest question now would be how you can protect your assets should you get a divorce. The San Diego Family Law Attorney will help you understand this crucial aspect of a divorce.
California Divorce – Individual and Communal Property
Understanding the law on community property is crucial for the protection of assets in the event of a divorce. The reason behind this knowledge is that it is critical for establishing how a couple would divide assets should they get divorced. California is a state of community property. A community property state acknowledges three kinds of properties. They include separate and sole property, quasi-community property, and community property.
A person gets separate and sole assets in states that acknowledge community property, just like in states that recognize common law. The property a partner accumulates before marriage is known as a separate property. Additionally, any property a person receives directly from someone else as an inheritance or a gift specific to them falls in this category. During a marriage, a couple may agree to treat some property they acquire as separate assets. Ideally, this means that should a spouse have a creditor; the creditor cannot make a claim against the assets belonging to the other party. States that are community property such as California note that separate property is separate for every intention, including a divorce.
Property that is jointly owned by a couple is known as community property. This may be personal or real property found in any part of the world. In order to recognize an item as legal community property, it must have been acquired by a married individual. The married individual must have acquired the property while living in a state of community property. This kind of property means that the partners can manage, control, and direct the community property.
An essential feature of community property is the coextensive interests of both parties. The interest is applicable to every community property the married individuals own together. This means that if one partner has a creditor, the creditor can lay claim on the assets owned by the couple. This also includes debts either partner may have incurred during the course of the marriage or before. This is true irrespective of the spouse that controls or manages the assets.
Creditors have a right to attach a claim on community property. This is irrespective of if a spouse or both spouses were part of the debt. A judgment for debt against one spouse or both may be done against the community property in California.
On the other hand, Quasi-community property is assets that may have been categorized as community property if, at the time of acquiring them, the partner lived in California. Quasi-community property can be personal or real assets. For reasons of liability allocation, this kind of property is categorized as community property.
Various factors are used in the law to establish if assets will be categorized as separate, community, or quasi-community property. These factors include the following:
- Time – this was the period or date when the property was acquired. This ideally seeks to establish if the assets were acquired during the marriage or before.
- Source – this factor deals with where the resources came from to buy the assets. The law seeks to establish if the assets were purchased using money that was owned by the partners or separately.
- Transmutation agreement – this determines if the spouses had an agreement to transfer the property character. Transmutation agreements give the mandate to transfer community property to separate property. Transmutation agreement also allows the change of a separate property belonging to one party to the other party.
- Use of law – this involves trying to establish the property character using legal presumptions.
Protection Avenues for Assets in California
The law provides various avenues to protect one’s property in the event of a divorce, as discussed below.
Premarital Agreements
These are agreements that are legally binding and made between a couple that wants to get married and become spouses. These agreements are commonly known as premarital contracts or marriage settlements. In some cases, they are called antenuptial agreements or marriage contracts.
The Uniform Premarital Agreement Act in California was enacted to control premarital agreements. In 1986, the act was adopted, and it stipulates the requirements needed before drawing a valid and legal premarital agreement. One of the requirements is to have the agreement written down and signed by the parties entering the marriage. The act states that entering a prenuptial agreement should be voluntary. It further says that there should be transparency in disclosing the financial and property obligations of either party.
These agreements are also used to determine the obligations and rights of each individual concerning the property. If detailed, they may include how to use, sell, or buy assets as well as their management and control. In the event of a divorce, premarital agreements can be used to establish how the assets will be divided. In case there is a need to amend or revoke the agreement, it must be done in writing.
During divorce proceedings, a spouse may want to challenge the premarital agreement. However, he or she must prove they were coerced to enter the agreement. The judge will also make his own observations regarding the premarital agreement. These may include elements such as an extreme disparity in the knowledge or age of the parties and the absence of adequate legal advice. The court may also consider other circumstances around the time of signing the agreement such as pregnancy, poverty, or sickness.
One can use premarital agreements to protect their assets by being able to convert community property to separate property. In the event of a divorce, they are used to establish the division of property. One of the advantages of having a premarital agreement is that it cannot be subjected to fraudulent transfer laws. In recent years, the state of California has also established that these agreements can be used to control payments of spousal support.
Sole and Separate Property Agreements (Transmutation and Postnuptial Agreements)
The agreement drawn by spouses after getting married is called a postnuptial agreement. Agreements that are made and can change the property character belonging to a spouse are known as transmutation agreements. They may be used to transfer community property to separate or sole property as well as change separate property to community property. However, these agreements cannot be used in changing anything else in marriage apart from property relationships.
Confidentiality is what governs postnuptial agreements, and they are applicable only in fiduciary relationships. Transmutation agreements can be used when making changes to properties under the ownership of the couple when they entered into the agreement. The law in California indicates that transmutation agreement should be legally binding, fair to all, and based on complete disclosure of every fact.
Transmutation of personal or real assets is invalid unless it is in writing with an expression of declaration. The declaration should also be acceptable by the partner that is greatly affected by the agreement. However, transmutation agreements can be subjected to fraudulent claims. Therefore, it is vital for the transmutation of properties to be done before divorce happens.
Offshore Trusts
Probably, the ideal tool for residents of California that seek to secure their assets should divorce happen is offshore trusts. Offshore trusts can protect personal assets by separating the benefits and interests of the property and ownership. Many people prefer using offshore trusts to protect their properties in case of a divorce as compared to local avenues due to various reasons.
One of the reasons is that domestic trusts perceive former partners as creditors. This means the local trusts are unable to protect the property of a person from ex-spouses in the future. If a divorce happens, domestic trusts will not be useable.
The second reason is that offshore laws do not acknowledge judgment made in another country for they are foreign to them. What this essentially means is that should a disgruntled ex-spouse be given a judgment that is against the properties held by an offshore trust, they cannot access the property. The state of California cannot make claims over or enforcements against the estate that is held offshore. This means the disgruntled spouse will have to go where the trusts are held to launch a complaint. This is different from the postnuptial and premarital agreements that a spouse can be able to challenge them in a local state court.
For a resident of California to enjoy the protection of offshore trusts, they must avoid fraudulent claims. The court views most fraudulent transfers as civil cases. Accusations of fraudulent transfer of assets in divorce cases happen when a spouse transfers assets when it is imminent that a divorce is about to happen. For instance, a partner may be found cheating, and he or she decides to transfer their assets offshore immediately.
Offshore trusts work most effectively compared to other avenues of asset protection. The best way to eliminate fraudulent transfer claims is ensuring the assets are transferred prior to marriage. By doing this, you will be provided with a more substantial way of protecting your assets as found in premarital agreements. Individuals that opt to protect their assets by using offshore trusts will receive significant benefits in asset protection. This happens without the need to ask their spouses to sign or draw a premarital agreement.
Negotiation
If you had no prior agreements to the marriage or made any agreements during the marriage and divorce happens, how then can you protect your property? If you cannot prove the asset is a separate property, your best bet would be to negotiate to protect your assets. Community property is not always split down equally, but you can negotiate your way to getting that asset you value so much. For instance, you may have a business that you do not want your soon to be ex-spouse to have a share in. In such a case, you may need to discuss with them and their lawyer during the divorce settlement.
Going to court and let the court split it may not be done in a way that is favorable to you, but negotiating may get you what you want. Negotiations include a give and take. As you negotiate, the other party may ask that you yield something in return. You must always ask yourself if it is worth the sacrifice.
Probably, you want to keep the family house because you do not want to sell it because of sentimental values. With your lawyer, you can come up with a strategy or a proposal that you present to the other party for their consideration. Then, you can offer to compensate the other party of their share by taking a mortgage against the house, and you are left paying it off. In any case, you understand what you want better, and negotiations are usually the best way to settle things with your spouse. If you cannot manage such negotiations, we advise you to seek the services of a mediator, who must be well-versed with family law matters.
Consult a San Diego Divorce Attorney Near Me
When we get married, everyone is looking to live happily afterward, and the thoughts of protecting one’s assets are never there. This has lead to many couples having protracted court battles trying to settle their estate when divorce happens. All these can be avoided by entering into a prenuptial and postnuptial agreement or using offshore trusts to secure your assets, among other ways. You can also settle for negotiations, and we at the San Diego Family Law Attorney will be happy to help you and your partner reach an amicable solution that works. Please contact us today at 619-610-7425 for a consultation.
