No one ever wants to enter a divorce, but unfortunately, it is something that many people experience in life. When going through a divorce, it’s important to protect the assets you have worked hard for and expected to share with your spouse. To help provide guidance on how to do this, here are ten tips on protecting your assets during a divorce.
1.Protect Your Separate Property
In many divorces, assets are classified as either marital or separate property. Assets acquired during the marriage are considered marital property, while separate property includes assets owned before the marriage or obtained through inheritance or gifts. It’s essential to take steps to protect your separate property during divorce proceedings.
To safeguard your separate property, keep detailed records that clearly document its origins and ownership. Maintain separate bank accounts and financial statements for these assets to avoid commingling funds. Combining your separate property with marital assets can make it vulnerable to division.
Keep detailed records of any contributions you make to your separate property during the marriage. For example, if you use separate funds to pay for improvements or maintenance of a separate property asset, document these expenditures to establish your claim to the increased value. Consult with a professional to ensure that your assets are being properly protected.
2.Be Mindful of Joint Debts
When you’re married, it’s common to accumulate joint debts, such as mortgages, credit card balances, and loans. During a divorce, these debts must be addressed and divided fairly. To protect your financial standing, start by obtaining a clear understanding of all joint debts.
An attorney can be impactful when negotiating the allocation of debts. They may also advise how to avoid damaging your credit score in a joint account. This may be through the emphasis on closing it and transferring the liabilities. It ensures that you not only safeguard your credibility but also guide your financial stability.
3.Consider a Prenuptial or Postnuptial Agreement
These legally binding contracts help clarify the financial obligations and rights, which brings a sense of understanding. This saves a couple from the stressful moments of fighting for assets when the emotions are high. It may not be among the most romantic things to do in marriage, but it will certainly be worth it in preventing disputes.
However, it’s essential to take your time with things while signing the agreements, as you want total fairness. Let both parties give ideas and views on how best to develop the contract. Keep in mind the contribution of everyone and how the future will likely change the wealth pool.
4.Consult with a Knowledgeable Attorney
Divorce is extensive and tiring, which is why you need a lawyer by your side, as they have experience in the field. Do thorough background checks on their work history and success rates. This gives you an image of their competency in handling clients.
If you are considering using a trust to protect your assets, consult with Attorney Blake Harris to determine whether a trust is suitable for your situation. A trust can be established before or during the marriage and can help protect specific assets such as property and investments.
5.Protect Your Retirement Accounts
Get a valuation of all retirement accounts and pension plans before the divorce proceedings begin. You may want to consider a QDRO (Qualified Domestic Relations Order) to divide the retirement account or pension plan during divorce proceedings. A QDRO is an order that allows the transfer of retirement benefits from one spouse to the other.
6.Understand Your State’s Laws
Different states and regions have specific divorce laws governing asset protection. Understanding the ones that apply to your jurisdiction makes your work easy. Most states work with equitable distribution principles, meaning fair allocation among the parties. However, the amounts are not necessarily equal as many factors, such as the contribution to the wealth generation, come into play. Familiarizing yourself with the sharing criteria helps you anticipate the assets to expect, bringing peace of mind.
7.Assess and Value Your Assets
The value of assets are influenced by many factors, such as economic changes. Some properties, such as vehicles, tend to depreciate in value while the likes of properties will appreciate. This makes it a good idea to take time on the valuation of each asset.
Getting the correct figures ensures you receive a fair share of what you deserve. The right thing to do is look for professional assistance, such as through appraisers, as they’ll do independent assessments. Alternatively, consult a financial expert who will take you through the current worthiness of possessions and guidance on the related benefits.
8.Explore Alternative Dispute Resolution Methods
The litigation procedures are time-draining and costly for both parties. Options such as collaborative divorce or mediation can be helpful. During these procedures, you’ll have open communication and cooperation in the matter, which makes it possible to arrive at a mutual agreement quickly. What matters is openness and a sound understanding of everyone’s rights. Contrary to when engaging in courtroom battles, these alternatives make you feel in control over the decisions.
9.Keep Detailed Financial Records
Keep accurate records of all your financial activities, especially investments and purchases made during your marriage. This can help establish who owns what and may prevent disagreements over assets during the divorce.
Have copies of financial documents such as tax returns, investment accounts, and property deeds. During the court proceedings, attention to detail prevails in every session. It helps establish your financial standing even when engaging in out-of-court negotiations. Compile all the papers well so they speak the same language on the funds flow. Keep the records safe as it prevents any doctoring.
10.Open a Personal Bank Account
A personal bank account in your name can ensure your funds remain under your control throughout the divorce. Channel your income into this personal account and use it to cover your personal expenses and legal fees. By separating your finances from joint accounts, you shield your assets from potential disputes and maintain financial autonomy during and after divorce. Consult your attorney before making significant withdrawals or transfers from joint accounts. Taking unilateral actions without proper documentation or legal authorization can have serious consequences, so do it carefully.
Divorce can be an emotional and hectic procedure for every couple. Remember you hold the power to ask questions and gain clarity during this unexpected chapter of life. Don’t let the concerns of protecting your assets distract you from actively understanding legal decisions as they present themselves. Doing so ensures that you are protecting yourself now and in the future. Consider working with a lawyer who’ll help you navigate through the process.