It is often said that the best defense is a good offense. No one wants to plan for divorce, and yet, the best way to protect your assets through a divorce is to begin preparing today. Whether you have been blessed with a large inheritance passed down for generations or are in the initial stages of accumulating a few personal items, there is no better time to plan than now.
DIGGING INTO YOUR ASSETS
Let’s begin by reviewing a few of the more common assets often divided in a divorce:
• Bank accounts/retirement accounts • Real estate/miscellaneous personal property • Life insurance policies/Health Savings Accounts (HSAs) • Mineral interest/partnership agreements
Once you have identified assets owned by you and your spouse, dig a little deeper to determine what is truly yours. Verify the names listed on the bank accounts and determine if you’re a signer or an owner. Are you listed on the deed to your house? Are you part owner in a business? Do you own an HSA? Are you beneficiary to a trust or estate?
Don’t make the common mistake of presuming you are an owner rather than signer on a bank account. The owner has full authority to limit powers or even remove a signer from the account without notice or consent. Also consider that the signers’ rights cease upon the death of the owner. It is well worth the phone call to verify your authority on the bank accounts in which you are associated.
The deed, not the mortgage, indicates ownership on a property. It is possible to be named on the mortgage of a house or property without being named on the deed. If your name is not on the deed, you are not guaranteed legal rights to the property in divorce or even death of a family member or spouse.
Consider the benefits and limitations of prenuptial and postnuptial agreements and/or asset protection trusts. You may choose to execute one of these contracts to protect assets, provide protection for children or business partners or even to prevent debt transfer. Be aware that while these contracts are generally upheld in court, a judge can nullify them. Nullifications are most often on grounds of unconscionability (deemed to be grossly unfair to one party), failure to disclose, or duress and coercion.
5 STEPS TO PEACE OF MIND
The time to try to make sound financial decisions is not during the storm of a divorce. We highly recommend the following five steps to start your path to financial peace of mind:
1| Understand your current financial situation. Run a credit report and create an inventory of all personal property.
2| Set up a separate bank account to hold any funds that should be segregated from your spouse’s property. One example would be your personal inherited funds.
3| Sit down with a reputable financial advisor and be prepared to seek advice in estate planning, asset allocation, tax planning, risk management and retirement.
4| Consider an LLC, trust, prenuptial or postnuptial agreement within your strategy, and keep in mind that different states often require different strategies.
5| Know where your documents are kept and update them annually and more often if circumstances change.
Don’t wait until you need protection to take first steps. If you have any questions or would like to discuss your specific situation, please contact a member of Federation’s Professional Advisory Council.
Mindy Hirt is Senior Vice President and Wealth Advisor at Argent Trust. She serves high net worth families with trust, investment, foundation, estate and family office services. She enjoys helping her clients find holistic solutions to their financial planning needs. She is a member of the Jewish Federation Professional Advisory Council (PAC).