Protect Your Home From Divorce

• More than half of all marriages end in divorce, yet very few people take the steps necessary to protect their assets from that possibility.

• A pre-nuptial agreement is the most basic legal tool to protect assets, but there are also more advanced tools available.

• Pre-nuptial agreements may not only define the inheritance rights of various heirs, but can also protect the less-wealthy spouse if he or she is giving up a lucrative career for the marriage.

• Pre-nuptial agreements can also help maintain control of family businesses, as well as clarify which state laws will apply in the event of divorce.

• If no pre-nuptial agreement exists, the marriage assets will be divided according to state law.

• There are several ways to protect property apart from a pre-nuptial agreement:

  1. Irrevocable trust – may result in loss of control and flexibility. Also, if you retain any control, your spouse may be entitled to some property because of it.
  2. Revocable trust – usually doesn’t protect assets in divorce. Also, if you die, state laws may supersede trust provisions granting no interest.
  3. Limited partnership - after divorce, the spouse who’s the general partner remains in firm control of the assets. If the outcome turns out to be too one-sided, however, courts will often set such schemes aside as unjust.
  4. Gifts – giving away money is a drastic solution, which may fail anyway if done fraudulently.

• In order for a pre-nuptial agreement to be binding, the agreement should be not overtly one-sided and there must be full disclosure of both parties’ finances. Any last-minute changes may not be enforceable.

• The agreement must be in writing, but changes may be made orally. Courts will be reluctant to interfere if it’s clear that both parties have abided by any changes. The agreement should, however, have a severability clause that makes it clear even if one clause is violated the rest of the agreement remains in force.

• The agreement should also make clear that there aren’t any agreements between the spouses other than those in the pre-nuptial. That will prevent either spouse from claiming oral promises were made that must be fulfilled.

• Don’t include provisions that encourage divorce, like allowing a spouse to receive more in divorce than he or she would otherwise receive.

• If you’ve entered in to a pre-nuptial agreement, avoid placing any assets in joint ownership, as this may supersede the provisions of the agreement.

• If you give a significant gift to your spouse, it should come with a signed memo explaining its purpose. That will avoid any later confusion over possible asset protection schemes.

• If you cohabit, it’s best to decide in advance how you plan to split your assets. Otherwise, the courts will decide for you.

Disclaimer: This article is provided for information use only. It does not take the place of an attorney, a tax advisor, or an accountant. Always seek out the advice of a licensed professional before undertaking any significant change in your financial situation.

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