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Protecting Investments in Divorce

Planning for the future is imperative. Putting important measures in place to protect your personal assets from garnishment, forfeiture and seizure is crucial to the success of your plan. If you’re contemplating divorce, you should carefully think about protecting your assets especially given that one of the most heated arguments during the divorce proceeding involves property division. Marital assets involve tiresome arguments regarding the manner in which the item was acquired, its value, and how it should be divided between the spouses. These are issues that can take months to sort out especially in high net worth divorce.

If you’re going through a divorce and you need help with the issue of division of property and asset protection, please do not hesitate to contact San Diego Family Law Attorney. Our skilled asset protection lawyers strive to develop and execute the most modern and cutting-edge investment protection plans. To make informed, beneficial decisions, our attorneys work closely with our clients in order to ensure that we get all the necessary information. Reach us online or call us today at 619-610-7425 to schedule a free consultation with a skilled and experienced asset protection attorney.

Community Property

California is a community property state, meaning that any property acquired during the marriage is community property. Conversely, property entered into prior to the marriage or after the separation is referred to as separate property and is only owned by one spouse. It’s common for each spouse or partner to have a particular interest in keeping certain investments after a marriage dissolution. For example, it could be an interest in a car or boat that's highly valued, the family home, a collection of jewelry or art, or a business that's privately held. You're not alone if there’s something which you do not want to part with it the process of divorce.

However, there’s a limited exception to this law and not all property will be considered to be community property just because it was acquired during the marriage. For instance, if you get an asset through inheritance, it will be your separate property. Divorce has its fair share of heated arguments with the parties trying to close the proceedings as quickly as possible. Before the divorce process begins, it’s crucial to ensure that you are aware of all assets which are at stake and have records of all property which may be at issue during a divorce. Your former spouse may attempt to hide assets which would ordinarily be considered community property.

Strategies Used in Protecting Investments in Divorce

In a legal battle, it’s important to implement different investment protection strategies that will help prevent loss of property to creditors. A creditor is an opponent in a lawsuit and in the case of divorce, your spouse is the creditor. If you are contemplating divorce you should consider organizing and structuring your assets in order to reduce the possibility of future liability. There are a number of strategies to protect your assets from legal problems. Some of the key strategies include:

  • Assets Acquired Before Marriage

Assets acquired before marriage are considered as separate property and this means they are in no way part of the communal property of a couple. An investment can qualify as separate property if it was a gift to a single spouse during the marriage, it was acquired before the marriage, it was acquired after a separation, or it constitutes the proceeds of separate property. The first way to protect your investments in a divorce is to keep them out of your disagreements altogether. These items are not just possessions, they mean the world to you and you want to keep them off limits. Therefore, it’s wise to start gathering evidence that you’ll use to prove that the asset you want to keep is separate property and should remain yours in the future.

Be sure to keep an inventory of all of your valuables. List and take photographs of everything that you acquired before marriage or those given directly to you. Once you’ve made a catalogue of each of your valuables, move them to a safe place. This should be done in a timely manner before you even file for divorce. This is especially important if you choose to leave your residence.  If the asset in question is inherited or gifted, you will be required to show that with a written proof. If possible, ask the individual that handed down the item for a written proof that provides as much information as possible concerning the item and when it was passed down to you.

  • Real Estate Titles and Mortgages

One of the most contested items in a divorce is the real estate owned by a couple. This is common since most married couples share real estate ownership through the use of joint home titles and joint mortgages. However, if you purchased a home and pay the mortgages without the help of the other spouse, it’s advisable to keep both the title and mortgage in your own name. Typically, this will only apply if you purchased the home before marriage. On the other hand, if your mortgage is joint, you can keep you real estate safe by refinancing to a single mortgage. In this case, your spouse must agree to the move.

  • Asset Protection Trusts

One option married couples have as a comprehensive asset protection strategy in a divorce proceeding is a trust. When spouses place their assets in a trust, it means that neither of them retains ownership. However, there is the revocable living trust that allows individuals to plan their assets outside of probate while at the same time retaining access and control. The problem with this is that your spouse with whom you share the assets will also have access and he or she can satisfy your debts with assets pulled from the trust. You can avoid this risk through the use of irrevocable trusts. But before you choose this asset protection strategy, it’s important to understand that irrevocable trusts can limit your access. Nonetheless, putting your investments in an irrevocable trust is one of the smartest choices for protecting personal assets.

For instance, say you have invested in a piece of real estate that you have no plans of selling. Say also, you have marital problems and you decide to get a divorce. If the real estate is in your name, and you all you want to do is hold onto it, placing it in an irrevocable trust will ensure that the property is safeguarded against your creditor who in this case is your spouse. One specific type of trust commonly used by individuals going through divorce is the Domestic Asset Protection Trust (DAPT). With a DAPT, the individual who owns the trust can also be named as a beneficiary.

You can leave your assets to your children, charities, and other beneficiaries. With an agreement, parties contemplating divorce can agree to reserve some assets for their children. In this case, a trust is a great solution as it ensures that the assets are not involved in the divorce and that no parent gains control of the assets especially if one parent gains sole custody of the children.

  • Prenuptial and Postnuptial Agreements

Perhaps the most effective tool for protecting your assets in a divorce is through the use of a prenuptial or postnuptial agreement. If you entered into a prenuptial agreement with your spouse, this is the time to use it to your advantage. The law provides broad flexibility for terms of these agreements. The terms of agreements are then enforced by the court according to the stipulated legal requirements. While prenuptial agreements can be used for different purposes, one of the most common is to establish protection for assets that would otherwise be subject to division in the event of a divorce.

Normally, any asset obtained during the marriage is subject to division but if your prenuptial states that certain assets will still be yours after your marriage comes to an end, the agreement will trump other generally applicable rules provided it’s written according to legal code. You can also use a postnuptial agreement to determine the assets that belong to you and those that belong to your spouse. At times, delineating ownership is easy and other times it can difficult and the ownership will be contested. If the agreement clearly defines which assets belong to which spouse, both the parties can agree to release items they have no stake in. For instance, if you earn substantially more or have significantly more assets than your fiancé or spouse, coming up with an agreement can protect you from property distribution, unmitigated alimony, and legal fees in the event of a divorce. Therefore, if you’re planning for a divorce and you want to protect your valuable investments from your spouse, it’s time to dust off your prenuptial or postnuptial agreements.

  • Limited Liability Companies (LLCs)

There are different types of entities recognized by modern law. Such entities can be used to limit a person’s liability in a way that only partnerships and corporations used to be able to do. They include both publicly traded and closely held corporations, some types of partnerships, and the very popular Limited Liability Companies (LLCs).  An LLC is a legal entity that exists separate and can virtually stop all creditors from accessing protected assets. An LLC must be properly established and registered in the correct jurisdiction, meaning that you have a protective operating agreement and you’re not combining your assets and those of the LLC.

With an LLC, your personal debts will not affect assets in the entity and also, your personal assets are protected from the LLC’s liabilities.  Since it’s all too easy to have your assets seized in a divorce, it’s always important to have your assets protected in a Limited Liability Company. This is great asset protection strategy because investments are not in your name making it difficult for them to be located or seized. It also provides much better asset protection than ordinary partnerships and sole proprietorship.

Personalizing Your Investment Protection Plan

Developing an effective strategy to protect your investments is all about knowing your unique personal needs and circumstances and the action that makes the most sense. Factors that come into play include your family circumstances, your business or profession, your accumulated wealth, and even your health. As already discussed, there are different asset protection strategies in the event of a divorce and before you settle on any one of them, take time to consult with a legal expert.

Conveying Assets into the Legal Structure

When it comes to protecting investments, the critical element is the ability to move the assets when situations dictate. If you’re already in the middle of a divorce proceeding, the question of moving assets is very critical. If you move the assets in an untimely manner, the courts may deem the transfer as fraudulent and even hold you in contempt of court. However, you’re pretty much free to do as you wish with your assets if you act when there is no known claim or lawsuit. If you’re contemplating divorce, the sooner you put in place an asset protection plan the better. Once the divorce proceedings begin, your assets will be out of reach of your spouse no matter how much a persistent claimant he or she will be.

It’s unfortunate that many people only engage in responsive protection and falsely believe that they have done everything that will help protect their assets. This false sense of reassurance leaves your assets exposed if you or your spouse files for a divorce because you fail to consider the likelihood of predictable of less predictable misfortunes and events. You carry insurance but you don’t expect to be involved in a serious car accident or your home to burn down. Then it would make sense to protect all of your investments from issues such as divorce that are increasingly common today.

Contact San Diego Family Attorney Today

At the end of the day, the goal is creating and implementing a comprehensive plan to protect your investments. You’ve spent a lifetime investing in and so don’t let everything slip away overnight. At San Diego Family Attorney, we help clients protect investments in the event of a divorce. Our attorneys are not afraid to stand in the gap. If your marriage comes to an end, we will help you come up with a plan that will help protect your interests. To learn more about how to protect your wealth in your personal situation, call 619-610-7425 to schedule a confidential consultation with an attorney.

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