DIVORCE ASSET PROTECTION

divorce asset protection

Divorce Asset Protection Attorney in Denver, CO

During a divorce, you must be careful to protect your assets. This is especially true for high asset divorces. Valuation and division of assets and property can be a challenging matter. That is why it’s important to have an experienced professional at your side to help you properly protect your assets. At Litvak Litvak Mehrtens and Carlton, we have 65 years of experience in divorce asset protection in the state of Colorado. More specifically, we know what it takes to protect you, your assets, and your rights. Call today at 303-951-4506 to arrange a consultation.

Understanding Divorce Asset Protection

Asset protection is a means to protect and safeguard your wealth. High asset individuals may use asset protection techniques to limit their spouse’s access to their valuables in the event of a divorce. 

Asset protection is not the same as hiding your assets. Concealment of assets is illegal and can result in serious consequences if caught. Instead, it is a component of financial planning that applies strategies to legally guard your wealth.

Effective asset protection begins before the divorce is even initiated. Some useful methods for protecting assets include the following:

  • Accounts-Receivable Financing
  • Asset Protection Trusts
  • Family Limited Partnerships
  • Judgement-Proof Asset Protection (Offshore Trusts)

Divorce Asset Protection Planning

To plan for asset protection means to think ahead. Asset protection planning works by creating a fully-developed financial plan that takes into account the individual’s entire situation. Some ways to go about this is to use insurance policies, estate planning instruments, state homestead protection laws, and business vehicles to navigate tricky legal areas.

The right asset protection planning can save your lifetime of wealth that you’ve accumulated. This includes your investments, savings, property, and future potential income. Good asset protection planning should make it difficult or even impossible for your spouse to take your assets in a divorce. 

What Is a Domestic Asset Protection Trust?

Many affluent people and families use a domestic asset protection trust (DAPT) as an advanced asset protection technique to secure their assets from creditors. It can also be a useful tool for securing assets during a divorce.

The following is an explanation of how a DAPT operates. A DAPT is an irrevocable trust, unlike a typical revocable living trust. What is the significance of this? When you’re in financial trouble, a creditor might go for whatever assets you own. By definition, a revocable living trust is one in which you retain authority over the assets. You can cancel the trust, withdraw funds, and so forth. A creditor puts themselves in your position and has the same power to remove cash to satisfy your claim. However, you renounce all rights to the assets and have no control over them in an irrevocable trust. If you don’t have control over the assets and can’t remove them, neither can your creditors.

Who wants to relinquish control over their assets? What if you could place assets into an irrevocable trust while being the beneficiary of the assets? What if your creditors still couldn’t get their hands on your assets? The DAPT comes into play here. It permits the trust creator to be a flexible beneficiary while still protecting the trust assets from the creator’s creditors.

What Are the Exceptions to a Domestic Asset Protection Trust?

The major drawback of a DAPT is the uncertainty about whether it will hold up in court. DAPTs haven’t been put to the test in court that often, despite the fact that they’ve been around since 1997. Due to the expense of battling to get the assets, most cases settle out of court for a lower agreed sum. DAPTs have shown to be useful negotiating chips for resolving debts for a lower sum and shielding assets from creditors and litigation in situations other than bankruptcy.

Whether the creditor is an existing creditor or a non-pre existing creditor, there is a statute of limitations that applies. To protect prior creditors, the statute of limitations term is tolled if there is a pre-existing creditor.

Almost every state that allows DAPTs also has a creditor exemption legislation. Certain types of creditors are protected by these statutes, which provide them access to a DAPT’s assets. A divorcing spouse is a common exception creditor. Nevada is the only state that does not have any exemption creditors.

What Assets Are Protected from Divorce Settlements?

Spouses have property that is independent from what they have amassed as a married couple. Family courts across the country recognize the separate nature of this property. Separate property is typically excluded from a divorce award, whereas the assets that make up the marital estate are susceptible to split at the moment of divorce. However, certain assets receive protections. Below, we outline which assets receive these protections.

Premarital Property

The property that one spouse brings into the marriage is often off-limits to the other. However, if the previous property has been mixed with marital property, this can alter. For example, if the other spouse was added to the account or assets from the account were utilized in transactions that were indistinguishable from separate transactions and marital transactions, the account became commingled property.

Furthermore, premarital property that rose in value as a result of the other spouse’s efforts may be the foundation for an award to the other spouse. States have different approaches to this problem.

Inheritances and Gifts

Most states accept that property received as a personal gift or inheritance by an individual is distinct property that is not susceptible to partition. Most state laws, however, stipulate that the spouse who wishes to classify property as separate property bears the burden of proof. For example, the spouse may be asked to provide a will or deed stating that the property was transferred to him or her alone, rather than to the couple as a whole.

Colorado State Laws

States fall into one of two categories: equitable distribution or communal property. Property earned or gained during the marriage is considered jointly and equally owned by both spouses under community property states. Property that was owned previous to the marriage, acquired as a gift, or received as an inheritance is generally excluded in community property laws. Any revenue received from a separate asset is generally included in this category.

In places where equitable distribution is practiced, such as Colorado, the court looks into the origins of the property to decide who owns it. The legal title of an asset may be used by equitable distribution states to decide whether it is a marital or separate asset. Premarital property, presents, and inheritances are generally excluded from equitable distribution states.

In equitable distribution states, the state may only award one spouse with an asset earned during the marriage. As long as state law is obeyed, they may even order that some distinct property be handed to the other spouse. State law may demand a written declaration from the family judge explaining why separate property was given to the other spouse. Alternatively, if the other spouse squandered marital assets by gambling them away, or if the other spouse committed adultery and used marital assets on the affair partner, state law may enable the property to be divided in this manner.

In establishing what constitutes a fair distribution of property, states might look at a number of criteria. They may examine, for example, how much separate property each spouse will have after the divorce, how much spousal and child support has been ordered, and how long the marriage has lasted.

Property According to an Agreement

If couples disagree with their state’s default regulations, they are allowed to debate this matter among themselves. This can be accomplished during the divorce process through mediation or negotiation. The couples may be able to come to an agreement on how their assets should be split. This agreement may be incorporated into the divorce decision by the judge.

Alternatively, before being married, partners may come to an agreement. They may, for example, sign a prenuptial agreement that specifies how property would be handled in the event of divorce or death of one of the parties. In order to be enforceable, prenuptial agreements frequently include processes that must be followed, such as providing particular financial information and being advised of the suggestion to seek independent legal assistance. A postnuptial agreement is similar to a prenuptial agreement, except it is signed after the couple has already married.

Why You Need Litvak Litvak Mehrtens and Carlton For Asset Protection During a Divorce

To properly protect your assets in case of a divorce, you need an experienced Denver divorce attorney on your side. Our skilled legal team at Litvak Litvak Mehrtens and Carlton will carefully value your assets and arrange them properly. 

No matter how high your assets or how complex your estate, our attorneys will handle your case with the utmost care and attention. We are proficient in negotiation and litigation to ensure you receive the best possible outcome from your divorce. 

If you have high assets, don’t wait around until it’s too late to do something. Make sure you have the proper asset protection in place ahead of time. If you have any other questions or concerns about asset protection, call us at 303-951-4506. You can also fill out our online intake form here.