Protecting Your Assets During a Divorce
Different Ways to Protect Assets From Your Spouse
If you are planning on getting married in the near future and would like to take steps to protect your pre-marital assets in the event your marriage comes to an end, you may want to consider a couple of methods that will help you do so.
A prenuptial agreement is, as the name implies, a contract that is entered into between a prospective couple before they walk down the aisle. Although many people believe that they are solely the province of wealthy celebrities, the truth is that they can be valuable in several other types of situations as well. As one example, if you have already started a business venture, any appreciation in its value after you get married could be considered a marital asset that would be subject to equitable distribution during the property division phase of the divorce. By clearly stating in the agreement that such value would remain an asset solely owned by you, it would remain your property.
There are a few caveats when it comes to considering a prenuptial agreement, however. If it ends up being challenged by your estranged spouse during divorce proceedings, it could be overturned by the family court judge who is presiding over your case on one or more grounds, such as being overly one-sided in your favor, allegedly signed by the other party under duress, or entered into by your prospective spouse who did not have independent legal representation at the time. Accordingly, it is important that prior to it being signed you fully disclose your financial status. It should also be entered into well in advance of the wedding date, and it should be reviewed by each of your respective divorce lawyers.
Some of the Reasons Why You Might Not Want to Have a Prenuptial Agreement
There are a few reasons why entering into a prenuptial agreement might not be a good choice in your particular situation. Perhaps the most common one is that your prospective spouse thinks that having a conversation about entering into a document that covers what will happen in the event that your future marriage comes to an end is not the best way to start off a relationship that is supposed to last “till death do us part.” In other cases, one or both of you might not want to fully disclose the state of your respective financial affairs. Perhaps most importantly, it could be relatively easy for a prenuptial agreement to be successfully challenged by your future spouse’s divorce lawyer in a New Jersey family court where your divorce is being litigated.
So, is there an alternative to a prenuptial agreement that would work for you? You might want to consider preparing a revocable trust.
What Is a Revocable Trust?
A revocable trust, which is also often referred to as a living trust or an inter vivos trust, is a type of legal document that, as is the case with other types of trusts, has three parties – the grantor (who is the person who has prepared the document or who has caused it to be prepared), the trustee (the party that is responsible for administering the trust in accordance with its terms as well as with the wishes of the grantor), and one or more beneficiaries. Unlike many other types of trusts, these three parties are often the same individual. However, an alternate trustee is usually named in the event that the original one becomes incapacitated or is otherwise unable to perform its duties. There are frequently additional beneficiaries named as well.
Unlike an irrevocable trust, which, as its name implies, generally cannot be altered or revoked, a revocable trust is far more flexible. Thus, it can be changed at any time if the grantor so desires. In addition, assets that have been placed into the trust and titled in its name can be withdrawn or altered without the need for court approval.
A living trust is usually considered during the process of estate planning, as it presents a few advantages, such as avoiding what is often a lengthy and costly probate of a will and helping beneficiaries receive their share of proceeds in a more expeditious manner. Though, it has family law advantages as well. If the document is properly prepared, executed, and funded prior to a grantor’s wedding, then all of the assets that have been transferred to it are deemed to be owned by it as a separate entity rather than by the grantor. What this means is that any of its assets are not considered to be marital property and thus not subject to equitable distribution in the event that the marriage subsequently ends. In addition, as previously noted, the grantor can add or subtract assets to or from it at any time. Thus, for example, if the grantor receives an inheritance during the marriage, it can be added to the trust. Otherwise, those funds could be inadvertently commingled with marital property, such as a joint bank account, and therefore subject to property division in the event of divorce.
How does this benefit your situation when attempting to shield your assets from a divorce? Again, if you have started a business prior to getting married, you can place it into such a trust, and it will not be considered a marital asset nor will any appreciation in its value that might occur after the date of your wedding. Of equal importance, you as the trustee can continue to manage and operate the business, enter into contracts, and acquire new assets or dispose of existing ones without any interference.
Of course, an existing business is not the only type of asset that can be placed into a revocable trust. You may have owned a home prior to your getting married and wish to put that into the trust rather than having to see the equity divided between you and your estranged spouse during divorce proceedings. While all of the scenarios described above can also be handled by a prenuptial agreement, a living trust will generally not be subject to court scrutiny, unlike such a premarital document.
How a New Jersey Divorce Lawyer Can Help You
Of course, very few people enter a marriage thinking that it will come to an end. However, the rate of divorce among couples throughout the United States continues to be high, and as more and more people get married later in life than in previous generations, they often come into the union already possessing significant and valuable assets. Accordingly, it can be prudent to consider what will happen to your premarital assets in such an event.
If you would like to schedule a meeting with us to discuss your situation and whether a prenuptial agreement or a revocable trust is right for you, contact the experienced family law attorneys at the Law Offices of Kelly Burton Rocco by filling out and submitting our online form or by calling our Hackensack office at 201-343-0078. We have significant experience working with people like you and who share your concerns, and we assist clients throughout Bergen, Passaic, and Essex counties as well as other parts of the state. Get the divorce advice you need today and expect us to be by your side throughout the process.