If you live in Alabama and are a high-asset individual with significant assets, you may want to consider taking affirmative measures to protect them. This applies if you are currently single, contemplating marriage, already married (happily or otherwise), on the verge of divorce, or embroiled in a divorce. Regardless of your marital status or situation, it can help to examine the protections you have in place currently or put ones in place that could protect your assets should you have to. Divorce for high-net-worth people can get complicated. Consider the following asset protection strategies for Alabama high-asset clients.
Prenuptial Agreements or Postnuptial Agreements for Asset Protection
Safeguarding your assets during a high-asset divorce may involve analyzing an existing prenuptial or postnuptial agreement to determine how these marriage contracts will affect your case. It may also entail creating a postnuptial agreement if you are married and have significant assets you want to protect and you think divorce may be on the table at some point in the future.
Prenuptial agreements can be effective for outlining the assets prospective spouses hold. Assets accumulated before marriage are termed separate assets and, with a prenuptial agreement, can be categorized accordingly. Separate assets may include investment or retirement accounts, real property, vehicles, and collections. In other words, anything you owned prior to your marriage that you want and expect to stay with you should you and your spouse part ways.
Marriage contracts can also address roles spouses will assume during the marriage. For instance, if one spouse becomes the designated caretaker of their children while the other spouse focuses more on their career, a prenuptial agreement can outline terms that would make the stay-at-home spouse financially whole should the marriage end.
A spouse need not back out of the workforce entirely to enjoy the protections a prenuptial agreement can provide. If a spouse, for example, decides to work less than their spouse to care for the couple’s children and the home, they can still negotiate a settlement, whether in the form of alimony or an offset of assets, that would keep them from being financially damaged by certain decisions made during the marriage.
Prenuptial agreements cannot, however, decide custody. When deciding custody in a divorce, Alabama courts will want to consider what is in the children’s best interests. That will entail an examination of numerous circumstances surrounding the family’s living experience, which, naturally, hasn’t happened yet.
Because Alabama is an equitable distribution state, courts will divide property according to what is fair based on the couple’s situation without an agreement stating otherwise. It is important to understand that if a court deems an agreement patently unfair, it may not uphold it.
Fair in Alabama may not mean equal. This is why a prenuptial agreement, or a postnuptial agreement if the couple is already married and can agree about certain financial aspects of their existing marriage, can be an important asset protection strategy for high-asset clients living in Alabama.
If you are a high-asset individual and don’t currently have one of these marital agreements in place, an Alabama high-asset divorce lawyer can help you create a prenuptial agreement or postnuptial agreement in the event you find that you may need to rely on one.
Revocable or Irrevocable Trusts
Setting up a trust can be an effective strategy for protecting assets belonging to Alabama high-asset individuals. There are generally two types of trusts: revocable trusts and irrevocable trusts.
When a trust is revocable, the creator retains control during their lifetime. Though they may have appointed a trustee and beneficiaries when they formed the trust, as long as they are living, they can make changes, including who will be a beneficiary and its trustee. The trust’s creator may also choose to dissolve the trust entirely.
When a trust is irrevocable, once the trust is created, the person who formed it may not change anything about the trust nor dissolve the trust. Therefore, when creating an irrevocable trust, you must be sure that is what you want to do.
The benefits of both trusts vary. Depending on your situation and goals for protecting assets, one type may work better for you. An Alabama family law attorney and the tax professionals they work with can help you decide.
Business Valuation and Ownership Status
Where one or both spouses work in or have an ownership interest in a family business, it can help to value the business and outline its ownership structure before there is a reason to question it, such as in a divorce. An Alabama family law attorney, alongside a forensic accountant, can help.
Creating certain types of partnerships or corporations may also help protect assets and delineate ownership. Doing so in advance can save time and potentially avoid disputes during the asset division stage of the divorce process.
QDROs
Dividing retirement accounts that are marital assets using a document known as a QDRO can aid in preserving them. If retirement accounts are dissolved for the purpose of splitting them, there could be severe tax consequences, for example. A QDRO not only designates which retirement assets will be divided, but it also allows them to be transferred from one spouse to another rather than liquidated, supporting a fair and equitable distribution of assets.
Asset Protection and Accurate Titling
Though separate and marital assets are not based on titling alone, it can help to title them accurately to avoid confusion or dispute later. Of course, if a spouse puts only their name on a marital asset, it will not prevent an Alabama court from recognizing that asset as a marital asset if the facts around its acquisition indicate otherwise.
It is equally important to keep separate assets separate. For example, if you had an investment account from before you were married that you designated as a separate asset but then chose at some point to liquidate it to purchase a house in your and your spouse’s names, that separate asset will become a marital one unless you put protections in place, such as with a prenuptial or postnuptial agreement, to prevent it from becoming so.
The same is true if you receive an inheritance during your marriage. Inheritances are not subject to equitable distribution in an Alabama divorce as long as those assets are not commingled with marital assets or used to purchase an asset that would belong to you and your spouse together. Before purchasing anything with separate assets, talk to an Alabama family law attorney to avoid problems later.
Hire an Alabama family lawyer experienced in helping high-asset clients with asset protection strategies.
When you’ve worked hard and have amassed significant wealth, you want to do everything you can to avoid losing it in a divorce. An Alabama family law attorney experienced in high-asset divorces for high-asset clients can support you.
At Summit Family Law, our Huntsville and Birmingham divorce lawyers are highly skilled in protecting assets on behalf of high-asset clients. We can help protect you during your marriage, at any stage of divorce, or if you are thinking about getting married. Call us today or schedule a time to speak.
