Divorce brings many new expenses and costs that must be considered. Creating or adjusting a financial plan early on can ease the transition.
Asset protection involves creating separate legal entities protected from claims against you. Strategies include establishing trusts and corporations. It also includes separating personal and business assets.
Establish a Trust
If you have substantial savings and assets, you must protect against lawsuits, bankruptcy, and other financial threats. Asset protection strategies involve using specific legal tools, including trusts, to shield your personal and business assets from creditors, says Investopedia.
One of the most critical steps is separating your personal and business assets. It can be easy to mix the two without realizing it and create a risk for yourself, so consider setting up an LLC or other business entity to protect yourself and your family from liability.
You can also strategically transfer the ownership of your property or financial accounts to an irrevocable trust. This can protect those assets from lawsuits and bankruptcy, but it’s essential to research the laws of your state before pursuing this strategy. You may need to sign documentation for this asset protection strategy before a judge. A financial advisor can help you set up an asset protection plan for your situation.
Transfer Assets
As soon as you begin thinking about divorce, keeping accurate and detailed records of your assets is essential. Developing a list of the separate assets you own (bank accounts, investments, property) and those in joint names can help you determine how much each purchase will be considered marital. This will be particularly helpful when establishing what type of alimony or spousal support you may be entitled to.
It is also a good idea to avoid converting separate assets into marital ones, such as keeping real estate in your name alone or not commingling funds from inheritance accounts. This common mistake can have repercussions such as monetary fines and the loss of credibility with the court.
Divorce is a complex process that requires careful planning and understanding of the legal implications of your actions. When going through this, one of the challenging aspects is deciding how to split the finances in a divorce, involving careful consideration and negotiation to achieve a fair and equitable resolution for both parties.
A trusted attorney can provide expert guidance regarding protecting your financial interests during a separation.
Re-Title Property
Divorce is often a long and complex process. During this time, it is essential to make wise financial decisions that will help protect your money during separation.
One of the most important tasks is determining what separate property and marital property are. Courts look at the value of assets and debt in deciding how they should be split. Individual property includes any help you owned before marriage or acquired individually through gift or inheritance. Keeping separate property in your name prevents it from being converted to marital property during divorce proceedings.
Before filing for divorce, be careful not to sell or change the names on any of your properties, accounts, and policies. Changing or hiding assets will look suspicious to the judge and could negatively impact your financial outcome. An experienced attorney can guide you in developing a strategy to protect your assets. Prenuptial or postnuptial agreements are good options for establishing and preserving assets during divorce.
Create a Budget
Knowing exactly how much you’re earning and spending is essential during divorce or separation. You can print copies of your financial records, including power and phone bills, bank statements, investment records, credit card bills, store cards, and tax records.
A good time to do this is before filing for divorce or starting the process of a legal separation. This will allow you to adjust based on the new income you expect to earn.
You can also work with a certified public accountant to determine your new tax liability and plan accordingly. This may include changing withholdings, paying more or less estimated taxes, and shifting investments from tax-free municipals to taxable bonds. You can also re-evaluate your portfolio to see if it’s still appropriate for your risk tolerance and goals.
