Ending your marriage and coming to terms with the aftermath of going your separate ways is often a tough journey. You had become accustomed to living life a certain way, raising children – or not, and sharing every aspect of your life with your partner. When things get too complicated, and divorce is the only way out, protecting your assets is vital to safeguarding your financial wellbeing. This way, your future income, business enterprise, and personal assets will not be caught up in long property battles.
You may have entered the marriage with many assets, continued to work harder, and built a flourishing business single-handedly or with your partner. What happens when it comes to the division of these assets? California is a community property state, which means all assets gained during the marriage are subject to 50-50 distribution. San Diego Divorce Attorney appreciates that cutting your wealth by half is not the ideal way of walking away from this union. In this article, we will discuss the following tips on how to protect your assets during a marriage dissolution.
1. Gather Financial Records
It is interesting to know that not many people keep accurate records of their finances and even more so when only one spouse is the breadwinner. The person earning knows more about the family's financial status than the homemaker, and this situation creates loopholes in managing funds. It can also be a reverse situation where the breadwinning spouse leaves most money-management issues to their spouse, and this too can pave the way for the mishandling of funds.
Once you decide to separate, we advise that you get bank statements on all assets dating back at least three years. You can have your property valued to get a clear picture of their updated worth should you decide to offload them and split the profits. Make copies of documentation from current, savings, investment, and retirement accounts.
Assets gained during the marriage also entail debt and outstanding loans such as car loans and mortgages on the primary residence. Vacation homes and any other obligations during marriage fall in this category. Get updated copies of real estate properties, so you know how much they are worth in the current market. Gathering all these financial details helps you and your attorneys know what they are working with, and how to protect your assets best as the marriage dissolves.
If you had some form of asset protection strategy in place, such as a prenuptial agreement, things would fare much better when it comes to the division of assets. It reinforces your stand in the battle over community property versus separate property with your estranged partner. As we have seen from many divorce proceedings, spouses will always contest such agreements claiming they helped build a business to astronomical success. If there was no prenuptial contract before marriage, things get murky, and the state's community property laws take effect.
Determining the real value of retirement and pension accounts cannot be overlooked. You have been growing these funds for a later date and probably never thought to look at these accounts. Attorneys advise knowing the exact value of these accounts, so you know what is coming your way, so your ex-partner does not undervalue them.
2. Open Personal Bank Accounts
Most couples have joint bank accounts, and this arrangement works pretty well. Once you decide to divorce, you must open separate checking and savings accounts under your respective names. The next step is determining how much money the earning spouse will deposit in these accounts to keep the family running as standard, such as paying utility bills and buying groceries.
Transparency is critical, so your spouse doesn't accuse you of attempting to hide money as the divorce is underway. There are other expenses to consider, such as legal fees and rent money for the partner who will move out of the family residence. You will also have to figure out transportation if you shared the family vehicle.
Divorce is expensive, and the process can take months from the day of filing to when the decree is granted. Therefore, we advise couples not to register until they are financially ready to cater for bills and attorney fees. This preparation saves then from sinking into unnecessary debt that will impact them afterward.
If you wish to retain the joint accounts, you can withdraw half of the money saved therein and put it away. This radical move protects the family assets from misuse in case the other spouse decides to go on a shopping spree as revenge. Please note, attempting to withdraw the full amount is frivolous as the court will notice this red flag, and order you to return the money.
3. Terminate Joint Credit Accounts
The last thing you want at this point is to continue sharing credit as this only complicates the divorce. Credit accounts, credit cards, or mortgage accounts must be closed, so they are in one person's name and clear these debts if the funds allow.
Allocating debt becomes more comfortable when there is less debt at hand and when the remaining obligation is in separate credit accounts. If one spouse has no income whatsoever, they will ask to have their name scraped off from outstanding debt. Nonetheless, this doesn't absolve them of debts accrued inside marriage. This spouse will likely have to find a job after divorce, so they can promise to absorb some of the marital debt and pay it off in piecemeal when they secure employment.
It is common for non-working spouses to disapprove division of debt, claiming they have no funds to pay creditors. If you cosigned on their credit card, this makes you responsible for half of their liabilities, and the same goes for car loans. A spouse without an excellent credit score will not qualify for a car loan, so they ask their spouse to cosign on loan. You are responsible for this loan even if you never use that vehicle.
Once you have closed all joint credit accounts, avoid accruing any more debt until the marriage dissolves. Having lesser debt to share alleviates the stress during divorce mediation where the judge will deliberate on the equitable distribution of debt. Please note, equitable distribution doesn't necessarily mean equal but rather whatever portions work. For instance, the spouse who gets the most debt will also get more savings to help pay off creditors.
4. Offshore Asset Protection Trust
Having an offshore account is one of the best ways of keeping your assets away from prying eyes of your soon-to-be separated spouse. They will be looking everywhere to see where they can get more money or property as part of the divorce settlement, and will likely hire an army of lawyers for this. An offshore account comes with an international LLC, which means your assets will remain in a secured bank that is located away from the United States.
The Cayman Islands, Switzerland, Germany, Singapore, etc., are some of the highly recommended overseas locations for opening investment accounts. If your assets are in the six or seven-figure range, you want an offshore account that does more than meet cursory needs. Avoid neo-banks as these merely provide transactional accounts, and their remoteness undermines their capacity to perform due diligence. Subsequently, they limit the kinds of services offered.
Offshore accounts in the Caribbean operate on "island time," which means customer service may be slow when you desperately need to perform a transaction. Also, these banks are under mounting pressure to adhere to US laws and regulations from other governments. If you transact from Belize and such island nations, your transaction will be flagged more often, which is annoying.
The above issues aside, there is an upside to opening offshore bank accounts to protect your investments from bad divorces. Check the jurisdiction to ensure it is of the best quality in terms of governance and economic stability. Ensure the country is pro-business, and there are no current investigations into their offshore banking activity or pressure for compliance by the US. The bank itself must be reputable and have a decent deposit available at any given time.
Other factors, like the ease of opening an account and bank policies that meet your specific needs, are vital. While you cannot merely open an offshore account from the comfort of your living room, the process needs to be seamless, and the customer service must be exceptional. You can research various options, or you can hire financial gurus to perform these background checks.
San Diego Divorce Attorney is a full-fledged law firm, and we have the best financial minds on staff to take care of your business needs. High net-worth individuals have been using asset protection trusts since 1925, and they have worked out just fine. We highly recommend this route, especially in Nevis and the Cook Islands as they have reputable banks and the jurisdictions are structurally sound.
5. Keep Valuables Safe
Apart from business ventures and savings accounts, you could have accumulated plenty of valuables that could fetch a high price if sold. Your engagement and wedding bands could be pricey, and selling them to start a college fund shouldn't be too difficult. These could be collectibles from vacations, high art, memorabilia, and other valuable items that were purchased with marital funds. In a community property state, these valuables must be split among the divorcing spouses.
Serving divorce papers may evoke anger in your spouse, and they could launch into a violent episode that could see valuables destroyed. They could set a pricey painting on fire, take your jewelry, destroy a vintage car, go to the wine cellar and break a few old bottles of Bordeaux, etc. If you imagine such drama may ensue, take away all valuable things and put them in a bank vault or get a post office box. Consider the monetary value of whatever assets and valuables you have after-tax, don't get too attached to certain things.
Ideally, divorcing couples take these measures before filing a petition, but you are welcome to protect your valuable items at any time. Change your mailing address to this box so your spouse doesn't intercept incoming mail and correspondence during divorce deliberations.
6. Find a Paying Job
Protecting your assets also means getting a paying job in case your spouse was the sole breadwinner. The judge will grant you alimony and child support if you become the custodial parent, but these funds are not enough to maintain you. Polish up your resume and get the necessary job training to boost your chances of appealing to hiring managers.
Even when the divorce settlement is likely to be substantial, these assets will deplete over time. What's more, you could have inherited a lot of marital debt, and creditors will be calling relentlessly. If you manage to get a job before filing for divorce, your financial standing will be much better overall. Circumstances may dictate you vacate the marital home and get another means of transportation. Therefore, you will need standby money to cater for living expenses before the settlement.
Also, balance out the financial power in the family, so your spouse does not hide or miscommunicate money matters. If they have been handling bills and servicing loans with marital income, start getting involved now, so you get acquainted with running the household. These skills will come in handy when you are officially divorced and leading separate lives.
7. Know Your Rights and Be Fair
Whether you are the sole breadwinner or the homemaker who has supported your spouse throughout the years, you must understand your rights. Couples who signed a prenuptial agreement before the marriage have rights and so do couples without any financial protections. San Diego Divorce Attorney is familiar with every code in California’s marriage and family laws. One of our primary goals is to educate clients duly to ease the mediation process.
Please note, being fair and using the right language is key during deliberations, so your partner is more inclined to listen. Maintain peace so you can negate confrontations that are emotionally draining, and the result is mounting legal bills where only lawyers win. Do your best to keep the peace and encourage the other side to follow suit in the interest of arriving at an amicable conclusion.
Find a Divorce Attorney Near Me
Divorce is a sensitive matter that should be handled by qualified attorneys who will do everything possible to protect their clients. Things can get out of hand when huge assets are involved, and greed is never too far away, especially when the separation is hostile. Influential spouses wield their influence to leave their ex-wives or husbands barely surviving, even when they didn't earn money.
Make sure you are using the right people; lawyers and financial advisors who will put your needs before profit. San Diego Divorce Attorney is well experienced in helping clients like you protect their assets before and during a divorce. Contact us at 858-529-5150 for your initial consultation, so we can start sorting things out for you.