How to Protect Assets from Your Spouse in Divorce

Jul 21, 2022

It is common today for couples to come to a marriage with significant assets. That doesn’t necessarily mean they come from wealthy families, but with people marrying later in life or having multiple marriages, there are more opportunities to accumulate money before tying the knot. Assets acquired before marriage generally are considered separate property and aren’t split in divorce, but some individuals inadvertently turn their separate property into marital property, which means it could become subject to division. The best way to protect assets from your spouse in a divorce is to use a prenuptial agreement and/or trust. 

When Do You Need a Prenuptial Agreement or Trust?

Most couples could benefit from a prenuptial (or post-nuptial) agreement because almost everyone has accumulated assets or debt before marriage. A prenuptial agreement addresses what happens to that property. It helps the couple discuss concerns like how they will deal with financial issues during marriage and in the event of divorce or the death of a spouse. 

Using a trust in place of a prenup or both together is particularly beneficial for individuals who have significant inherited or accumulated wealth and/or own a business. A prenup allows an individual to designate certain income, assets, and debt as separate but the trust further ensures that assets in the trust belong to the trust not to either spouse. When a trust is created, the property in it is held and managed by a trustee for the benefit of a beneficiary so the trust assets cannot become marital property because the spouse doesn’t own them.

For this reason, prenups and trusts are also useful if a party has children from a prior relationship. This allows the spouse to ensure all his or her children are treated fairly as well as provide money for the surviving spouse.

While in most cases, utilizing a prenuptial agreement and/or trust will protect assets in a divorce, spouses also have to take care not to commingle funds. If separate funds are deposited into a joint bank account or used to pay for marital expenses, they may become marital property subject to division in divorce.

What Type of Attorney Do You Need?

It is best to work with both a matrimonial and estate planning attorney to ensure that you have evaluated your options and have appropriate documents in place. We frequently counsel clients and their matrimonial attorneys concerning prenuptial agreements, trusts, and other estate planning devices to preserve assets. We also assist with property valuation issues. Valuation is important both for purposes of determining spousal support and equitable distribution.

If you are considering the best way to protect your separate property and income, contact us for a consultation.