Asset protection planning for divorce surpasses pre nuptial agreements in couple acceptance and protective performance.
Pre nuptial agreements have long been how forward-looking people try to protect assets from a future divorce claim. The primary purpose of a pre nuptial agreement is to separate personal property acquired prior to marriage so it is not co-mingled with marital property in a divorce settlement.
State laws as well as divorce judge’s discretions on property distribution vary wildly when it comes to premarital property. Financial planners and asset protection professionals are looking past the prenup to domestic asset protection trusts.
Wealthy parents of marrying children are the often the most supportive of prenuptial agreements hoping not to dilute family wealth through a divorce. In recent years we have seen asset protection trust statutes popping up in the law books of several sates. Laws are being implemented in many jurisdictions that give protective teeth to self-settled trusts.
What’s wrong with pre-nups?
- Starting a property battle while planning a wedding could start the beginning of the end in itself
- Pre-nups generally are for one person more than the other and could lack equality in consideration
- Often not appropriate for people marrying for the first time
- Agreements generally stress the family members on both sides of the marriage
- At the time of divorce, pre nuptial agreements can be unfair
- The majority of pre-nup’s don’t even get signed
Pre-marital trust planning
On the other hand, one individual can enact premarital asset protection planning without his or her fiancé’s involvement. Due to the unromantic pitfalls of negotiating a family property settlement the week of the wedding, some proactive individuals are avoiding the prenup altogether. The domestic asset protection trust is the single best alternative a single person can take to protect his or her assets from divorce.
Premarital asset protection planning can be as simple as maintaining separate investment and bank accounts or go as far as combining family limited partnerships and offshore trusts – popular tools that offer substantial asset protection.
A simple premarital agreement costs around $2,500 to $50,000, depending on the complexity and the amount of negotiation. An asset protection plan for an individual can be done for from between approximately $1,500 to $18,000.
How to establish premarital protection
There is no “silver bullet” to protecting assets in a divorce battle if your planning is not properly implemented. Divorce and trust law vary state-to-state, even more so if the family moves or maintains a second house during the marriage. Moreover, in a courtroom, family judges have broad power in distributing marital property. For example, one party’s trust holdings could drive a favorable property distribution to his or her spouse, which includes attaching alimony payments to distributions.
There are various approaches to different asset scenarios. When the wealth comes from the parents it is recommended that the assets get placed into a gift or inheritance trust. Generally, the marital estate does not include inherited property or gifts but it can include income and appreciation. Through using a trust the assets are compartmentalized into their own estate. A trust deed states what is given or inherited and what is not. If wealth is given outright, such as funds in a bank account, it could become part of the marital estate simply by depositing a paycheck or filing a joint tax return.
Establishing a self-settled spendthrift trust properly before marriage can separate trust assets from the marital estate. Creating a discretionary trust for one’s benefit, an independent trustee allocates distributions and since the trust legally owns the assets, not the beneficiary, the assets are protected from a divorcing spouse.
The strongest time to take action is to establish protection before you walk down the isle. After that, transferring assets into a self-settled trust could be considered fraudulent if challenged in a divorce case. Planning advice is most often asked for when it’s already too late.
Asset protection planners offers free consultations on asset protection from divorce, malpractice claims, litigation and creditors.
Trust shoppers have two strong options to establish a self-settled spendthrift asset protection trust. This can be done domestically, or offshore. The offshore option is for those seeking maximum asset protection. For those who don’t require the strongest asset protection vehicle available or aren’t comfortable investing offshore, our domestic products feature the Nevada Asset Protection Trust that affords the most protection with plan prices that are comparable to a robust prenuptial agreement.
For individuals and families looking for judgment-proof peace of mind, we offer trust services in the strongest asset protection jurisdictions worldwide.