How To Protect Assets in a Divorce
Divorce puts your entire financial situation under extreme scrutiny with the very real risk of potentially losing your home, your savings, your business, and your entire standard of living and way of life. That is why it is important to understand how to protect assets in a divorce.
Freeze or Close Joint Accounts
If possible, you should develop an agreed upon plan as to how you are going to divide and close any joint bank accounts. If you feel the other person cannot be trusted in this matter you should begin to FREEZE joint accounts immediately so that they are not able to decimate your savings. Do not simply withdraw all of the funds from the account, whatever your reasons this will make you look bad during the divorce which could lead to the judge ruling against you. It is better to freeze the account and then have the money divided between the two of you by the court rather than to simply take out the money.
Establish Financial Independence
You need to establish financial independence as soon as possible. If you don’t already have them, then right now begin setting up personal accounts for everything; this includes a standard checking account and having your pay sent there, getting your car insurance to be solely in your name and associated with the correct account, and establishing a personal retirement fund.
Tip: Ensure that your passwords for the new accounts are ones your wife will not be able to guess.
Understand The Difference Between ‘Community Property” and ‘Equitable Distribution’
In States which follow the Community Property model, everything owned by the married couple is considered to be equally both of their property and in the event of divorce is to be divided 50/50.
Physical assets kept in the home or in a jointly owned lock-box are both of yours unless they are items that either of you owned prior to the marriage, or they were a gift, or are part of an inheritance. This means that the necklaces, earrings, and other items that you purchased for her during the marriage are half yours.
Women feel entitled to these items, and when they find out they could end up being divided evenly among you it is not uncommon for these items to ‘disappear’ from your home and then you never see them again. Do yourself a favor and log them all officially before they disappear. If possible have your lawyer hold onto the items until they can be appraised. This isn’t just for jewelry, consider everything of value that is half yours and make a record of it.
States which follow this method are; Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Contrastly the Equitable Distribution model is more flexible with the court taking into account who actually paid for what during the marriage, in this model gifts or inheritance you received from someone (not your spouse) would be considered solely your property.
States which follow this method are; Alabama, Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia and Wyoming.
While generally ‘equitable distribution’ has a better reputation as being a system which results in more ‘fair’ divorces it is not the only factor and the overall culture of the state you’re getting divorced in can have a large impact on how the court interprets and enforces the law, consider for example that both Texas and California follow the same model of asset division (Community Property) but California made our list of worst states to get divorced, while Texas made the list of best states to get divorced in.
Set Up An Offshore Account
One of the most effective ways to protect assets is to set up an offshore account or asset protection trust. While some may feel this strategy is inching close to being a blackhat maneuver, offshore trusts in and of themselves are completely legal and add a layer of protection between your assets and anyone trying to take them from you including vindictive ex-spouses.
They basic benefit to an offshore asset protection trust is that it is outside of the legal jurisdiction where you are getting divorced, so if the court orders the trust to be turned over they can simply say ‘no’ and there isn’t much the court can do about that.
To set this up you:
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Set up an international LLC (Limited Liability Corporation)
- Set up an international bank account in the name of the LLC
- Set up an asset protection trust to house this LLC account
Ideally these steps are to be completed prior to you being served with divorce papers.
Tip: The top recommended country to establish an offshore asset protection trust is Cook Islands
In Summary
Knowing how to protect assets in a divorce can make the difference between losing everything and only losing a little. As part of your overall strategy to win your divorce you should consider all steps that need to be taken and then take action on them – simply reading about divorce strategies is not enough you need to actually implement some of these strategies in order to be successful in navigating your divorce to the best possible outcome for it.
