Protecting Assets Pre-Divorce
Nevada is a community property state meaning that upon divorce, property acquired during the marriage is equally divided between the parties. Separate property remains separate. Litigation often erupts about whether certain property is really separate or part of the marital estate.
The best and most effective way to protect separate property from being lost during a divorce is to take action prior to marriage. This can generally be accomplished with a prenuptial agreement. An even better approach is to establish a Domestic Asset Protection Trust (DAPT) which under Nevada law becomes a Nevada Asset Protection Trust (NAPT). If you have done neither of these things, there are still some steps you can take to protect your assets after you are married but prior to filing for divorce.
In order to enforce a prenuptial agreement under Nevada law, the agreement must be in writing, signed and dated by both parties. The agreement can specifically articulate which property is separate property, how property will be divided in case the parties divorce and how the issue of alimony or spousal support will be resolved. The agreement can be changed or modified even after the marriage as long as the modification is put in writing and both parties sign the modified agreement.
There are ways that a disgruntled party may try to challenge the validity of a premarital agreement if a divorce ensues. A divorce attorney knows the law and what needs to be included in the agreement in order for it to stand up to such a challenge.
Fifteen states now have provisions for DAPTs, which are ways to protect assets from creditors and to protect your separate property and income from loss in a divorce. The NAPT is an irrevocable trust which allows you, as the creator of the trust, to also be a discretionary beneficiary. This gives you control of the assets while protecting them from loss during a divorce.
Even those who do not live in Nevada can take advantage of the NAPT. The only caveat is if you live out of state, your real property should not be in the NAPT. All other assets, such as stocks, bonds and mutual funds can all be transferred to the NAPT.
There are specific legal requirements that must be met for a NAPT to be effective. An attorney will assist with all the specific legal requirements so that the document will stand up to any later legal challenge.
Planning for a divorce when there is no prenup or DAPT/NAPT
Many divorced people tell horror stories of discovering after the divorce that there were substantial hidden assets. Also, one party may have maxed out all the joint credit cards. Some may discover a bank account was frozen and they have no access even to grocery money. Some steps to take prior to filing for divorce include:
- Saving some money in a separate account that you will have access to.
- Canceling joint credit cards and be sure you have one that is only in your name.
- Do a complete asset search to locate all real estate holdings, business interests and banking and brokerage accounts.
- Locate and organize all financial records.