Divorce Asset Protection
Divorce puts your assets and business income under the gavel. By placing your business, income and property into an asset protection structure, you can fare much better than going into a divorce battle unprepared. So what types of legal tools are effective for a divorce asset protection strategy?
What to Do
Here is what you can to do protect assets from a divorce battle. First, keep in mind that local courts can penetrate just about anything you do domestically. Local judges have power over local assets. Sure, domestic asset protection vehicles exist: a trust, an LLC, a limited partnership. The problem is that courts have pierced all of them in actual divorce cases.
So What Works?
The most effective strategy is this. Put your assets into an offshore asset protection trust. The trust will hold an international LLC that you control while the waters are calm. The LLC will hold your bank and investment accounts in a secure bank located internationally. If needed, the trustee can step in to protect you. This combination of the LLC and the trust is one of the most powerful strategies to protect assets in a divorce.
Is This Safe?
Keep in mind you are employing this strategy because your assets are not safe by leaving them where they are. People have been using offshore asset protection trusts since 1925. Powerful trust jurisdictions such as the Cook Islands and Nevis have impeccable reputations. The trustees are licensed, so regulators conducted intensive background checks. Plus, the trustees are bonded, so the funds are insured. Of the top 50 safest banks in the world, as of this writing only three are located in the U.S. All three of the U.S. banks are on the bottom half of the list. So, much safer banks exist outside of the United States than inside.
Steps to Protect Assets from Divorce
- Put together all of your financial records for the past three years.
- Make copies of your bank, investment and retirement accounts.
- Set up an offshore trust and international LLC.
- Set up an international bank account in the name of the LLC.
- Establish credit in your own name.
- Get copies of your spouse’s account statements, if possible.
- Get copies of your real estate records.
- Record a home equity line of credit type of mortgage against property that you control. The mortgage will be payable to the international LLC inside of your asset protection trust.
- There are international institutions who can acquire the mortgages, if needed. They will place the cash proceeds into a “you can’t touch it account” in your offshore trust. You take this action because a judge may later require that you show a proof of cash distribution.
- Do not place your inheritance money with accounts that may also be in your spouse’s name.
- Make an inventory of personal property assets.
- It is best to set this up before your spouse serves you with a divorce. After a process server hands you divorce papers there are still ways to protect yourself. But it is much better to act beforehand.
Protecting Assets from Divorce
Divorce is a leading cause of asset distribution. Here we’re talking about the most protection one can establish when engaged in a divorce property battle. We are not merely talking about hiding assets. Many people who seek pre-divorce asset protection do so when problems arise in the marriage or after divorce papers arrive. There are tools that can provide protection under this scenario. But it is best to act beforehand.
Under the best circumstances, transferring the ownership of your separate property, including your business and income, into an asset protection strategy prior to tying the knot more effectively guarantees the protection of your assets in divorce. Whether you do so beforehand or after the fact, having a divorce asset protection plan in place strengthens your hand in the separate vs. marital property battle.
Discussed in a Forbes article are methods used to protect your business against a future divorce. Establishing a personal asset protection strategy is one of the most important techniques they discuss. The prenuptial agreement is another. It also stresses the need to take protective measures well in advance of the need, or likelihood of the need for asset protection.
Divorce: A Top Wealth Buster
Divorce is one of the top wealth busters an individual can face. Ideally, set up an asset protection before marriage. Yes, you can set up an asset protection strategy to protect your finances from divorce when troubles arrive. However, planning measures taken years in advance offer the most protection when placed under the legal microscope.
Statistically, a divorce is more likely to happen than a major car accident and are much more costly in terms of legal fees and property separation. Imagine having a divorce insurance policy where future income, personal assets and business never make into a property battle. That’s what a divorce asset protection plan provides.
Prenuptial and postnuptial agreements are not watertight. Not all states recognize them. They are often challenged. So they offer very little certainty. Certainty, in this case, comes in the form of a personal asset protection strategy. Moreover, they vary state to state. A strategy in California will differ from one in New York or Texas. By setting up the proper legal tools and transferring property into them , one can effectively shield assets from future liability and divorce.
Whereas it is best to have an asset protection plan in place before your spouse serves you with divorce papers, there are strategies that are effective at any stage in the game. Domestic asset protection strategies are usually not very effective. If you want a strategy that works, use an offshore trust. It is the one of the only methods that hold up after the fact.