How Can You Protect Your Assets During Divorce Proceedings?

Avoiding Financial Difficulties When Going Through Divorce

It’s an unfortunate fact, but divorce is one of the most financially devastating situations that a person can experience. Even if you’ve spent your whole life working hard, the end of a marriage can mean watching assets you’ve earned taken away. This is why knowing how to protect your assets during divorce proceedings is so critical.

There are certainly plenty of shady ways of doing this. However, concealing assets and other illegal tactics can worsen an already bad situation. Fortunately, there are a variety of legal and effective strategies for those who know how to use them. Family law can be incredibly complex, but with knowledge on your side, it’s possible to secure a fair outcome.

Understand Your State’s Divorce Laws

Perhaps the most critical step in protecting your assets during divorce proceedings is understanding divorce laws in your jurisdiction. This will play a significant role in determining which strategies will be the most effective. For instance, Alabama is an equitable distribution state. This means assets are divided based on the court’s determination of what’s fair.

If this sounds incredibly subjective, that’s because it is. This makes building a strong case an essential step for safeguarding what you’ve worked for. You’ll want to show the courts that you contributed significantly to your marriage and deserve a fair portion of the marital estate. Of course, keeping assets out of the marital estate is likely preferable.

Keep Separate Property Separate

Regardless of whether a jurisdiction recognizes community property or equitable distribution laws, all assets will be designated as either marital or separate property. The former refers to any assets or debts that were acquired during marriage. The latter includes pre-marital assets, gifts, and inheritances. Unfortunately, many people commingle these assets.

Commingling occurs when someone mixes separate property with marital property, making it difficult to distinguish between the two. For instance, imagine that you inherit $40,000 from a relative before marriage — but you later transfer it to a joint bank account with your spouse that you both deposit and withdraw from. These assets are now commingled.
This single mistake is a major contributor to unfair divorce decrees and property division outcomes.

Inventory All Assets

When going through a divorce, inventorying all assets might seem like a negative thing. After all, wouldn’t you be better off if certain assets you own were not mentioned during the divorce? In reality, this can create significant problems for you. It’s very likely that these assets will be discovered, and when they are, the court may view a lack of disclosure as fraudulent.

In reality, a proper inventory of all assets and debts can be incredibly beneficial for you. The larger the marital estate, the larger portion you’re likely to be given. Create a detailed list of all assets, including real estate, bank accounts, retirement accounts, vehicles, investments, and personal property. This step can expedite court proceedings and potentially save you money.

Update Your Estate Plan

Many people are surprised to learn that one of the best ways to protect assets during divorce proceedings has nothing to do with the actual divorce. When a relationship ends, so do the future plans of that intimate connection. If you’ve engaged in proper estate planning, you need to update relevant documents to reflect your new situation.

If you don’t have an estate plan in place, intestate succession will determine where your assets go when you die. This means a former spouse will get nothing. However, individuals who have wills, trusts, beneficiary designations, and other estate documents will need to update them so their ex-partner doesn’t get all their assets in the event of death.

Open Individual Accounts

In most situations, filing for divorce is the catalyst to end marital property designations. While you may still technically be married to your former partner, the law is likely to view any assets acquired after filing as separate property. This makes opening individual accounts a critical step in protecting your assets during divorce proceedings.

If you keep utilizing a joint bank account during this process, any assets secured after filing for divorce will likely be seen as part of the marital estate. You do not want this. You also want to avoid draining joint bank accounts, as this can reflect poorly upon you in court. If you believe your ex might do this, your attorney may be able to file a restraining order or freeze accounts.

Reach an Agreement With Your Spouse

Some of the biggest difficulties in divorce arise because the parties involved cannot agree on issues. While courts are often tasked with making important decisions – ranging from property division to child custody – they still prefer when the parties to a case can reach their own agreement. This is a great way to protect assets during your divorce.

If possible, sit down with your former partner to discuss your situation. If you believe it would be beneficial to have a neutral third party present, consider mediation. You can still have legal representation during this process. If you’re able to reach an agreement on your own, you may be able to avoid unexpected and potentially unfair decisions by the courts.

Seek Legal Advice

The availability of do-it-yourself legal websites and downloadable forms online has led many people to take a DIY approach to divorce. Unfortunately, this can result in unforeseen consequences. These services cannot account for your unique situation – and this can be a significant issue in equitable distribution states. You need experienced legal help.

Whether you’re in a common-law marriage or a more traditional situation, the divorce process is complex and frequently full of surprises. Even if you reach an agreement with your former spouse, simple mistakes can lead to the judge throwing your agreement out and forcing you to start from scratch. An attorney can make sure you’re doing everything by the book.

At Jim Golden Law, our law firm can show you how to protect your assets during divorce proceedings. Contact us at 866-950-6652 for a free 30-minute strategy session.