Asset Protection in Divorce

Creditor and liability problems can arise from a variety of sources, including divorce. Asset protection in divorce generally involves actions taken by spouses who want to protect their financial futures and avoid an unjust property division award.

Marital property consists of all income and assets acquired by either spouse during the marriage, even if an asset is in one spouse's name. This marital property is subject to division between divorcing spouses. Distinct property, such as property owned prior to the marriage, your inheritance, and gifts are excluded from marital property; these types of property remain non-marital property and are not divided at the time of divorce.

Individual property can lose its identity if mixed with marital property. For example, if you deposit your pay check into your premarital savings or investment account after marriage, then that account is considered marital property. The same may happen with inheritance property, like a joint account with your spouse. If you wish to have your partner's name on the deed and keep your entire equity or a particular portion of that equity, you should both sign an accord stating who possesses what piece of the property. Without an agreement, it will be treated as marital property and divided at the time of divorce.

There is a common custom in which some couples chose to sign prenuptial agreements to protect individual assets. A prenuptial agreement refers to a contract signed by spouses before a wedding; the agreement defines their property rights and expectations upon divorce. The agreement is also used to waive certain spousal inheritance rights, establish designated alimony, or even waive alimony, under certain situations. Courts will usually respect such agreements if they are drafted properly.

If your objective is solely asset protection in divorce, whether it is premarital, gift, or inheritance, a prenuptial agreement may not be necessary. Simply keep the non-marital asset separate. And think long and hard before you invest any large asset in your partner's name.

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