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How to Protect Assets from a Divorce

protecting assets from divorcee

Nobody likes to consider the possibility of divorce, but unfortunately, they are a far more common occurrence than we like to acknowledge. In fact, it is estimated that almost 50 percent of all marriages in the United States will end in divorce or separation.

It is easy to fall into the trap of believing that it will never happen to you, but the reality is that it very easily could. For this reason, it is better to be well prepared for the possibility, than have to try deal with the consequences after they arise. 

Aside from the emotional turmoil that a divorce can cause, it can also result in serious financial and practical complications. Divorce can be one of the most significant threats to your personal assets and financial wellbeing. It is important to understand these dangers, and how best to protect your assets in the event of a divorce before it arises. 

In this article, we will go over the most important steps for protecting your assets from a divorce, as well as the precautionary measures which you should take from the outset of entering a marriage. 

Table of Contents:

How Does a Divorce Threaten Your Assets?

Divorce naturally proposes a large financial risk, due to how inextricably linked your wealth, assets, properties, and even debt, might be with your spouse. Divorces often end up being bitter events, and therefore result in estranged spouses doing whatever they can to claim their share.

It is important to take the precautionary measures to protect your assets from divorce long in advance, even as early as the time when you first get married. When planning your divorce asset protection strategy, you should consider the specific laws which apply in your state, and how they may lead to varying levels of risk to your personal wealth:

Community Property vs Common Law

Divorce laws differ in each state and country. One important distinguishing factor is whether the state applies community property laws or common law. This has a major impact on how property and debt is viewed in the event of a divorce, and how it is shared or separated. 

Community Property

For example, there are nine American states with community property laws. These include the likes of Arizona, California, Nevada, Texas, and Washington, among others. In these states, all joint assets, as well as debts incurred during the marriage by either spouse, are equally divided in the event of a divorce by default. This is applied irrespective of who acquired them. In addition, if one spouse faces insolvency, their creditors are able to claim jointly owned property of both spouses in a community-property state. 

There are some exceptions to assets which are deemed as jointly owned marital property. These include gifts, inheritance, property which was owned before the marriage and property which is explicitly in one spouse’s name. It is also possible to protect yourself from some of the risks of community-property laws with a prenuptial agreement. 


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If you live in a country with community property laws, it is important to take additional precautionary measures to protect your personal assets. You should also take measures to ensure that you are not unduly liable for your spouse’s debt. 

Common Law 

States which don’t apply community property laws can be considered to be a common-law state, also known as equitable distribution. In common law states, only debts that were taken on by either spouse that benefit the marriage, or debts that are in both spouses’ names are considered to be joint liabilities. This means that personal debts, such as car loans or business debt, will be retained by the individual spouse who incurred it. 

In addition, income and property which were kept separate during the marriage are treated as separate in the event of divorce. Creditors can only claim assets belonging to another spouse if it was a joint liability, and can usually only claim up to half of the money in a joint bank account. 

It is clear that living in a common law state poses less risk to your assets in the event of a divorce, as there are clearer separations and distinctions, and assets are not just automatically assumed to be jointly and equally shared. 

For more info on practical steps, you can take to protect your assets from a lawsuit go here.

Steps to Protect Assets from a Divorce


1. Have a Clear Prenuptial Agreement

Nuptial agreements are an important precautionary measure to take to protect your assets in the event of a divorce. Prenuptial agreements place clear distinctions on which assets belong to which spouse, and can be especially beneficial in community-property states.

That being said, nuptial agreements are by no means fail proof. They can easily be challenged by your spouse, and are not even legally recognised in some states. As such, they should be used in conjunction with other, more secure means of asset protection, such as an asset protection trust. 

2. Officially Put Your Separation in Writing

Once you have decided to get a divorce, the first thing you should do is clearly put in writing that you and your spouse are separated and intend to proceed with a divorce.

A written note of this kind will help to protect any income that you earn after the separation, as it can be brought forward during later court proceedings. Without a binding separation document, income that you earn while you are still legally married might be at risk when it comes to divorce. 

3. Identify Which Assets Belong to You

It is of no use entering into divorce negotiations or legal proceedings if you do not know what it is you are trying to protect. Therefore, the first step is to actually identify all of your assets.

You should know exactly what assets you have and where they are kept, as well as which are in your personal name versus shared with your spouse. 

4. Keep Copies of Your Financial Statements and Separate Debt

It is of utmost importance to keep meticulous financial statements throughout your marriage so that if you are faced with a divorce, you can clearly prove which assets belong to you. At the time when you are faced with a divorce, start gathering and compiling all these documents, and be sure to have backup hard copies too.

Documents that you should have at hand include bank account statements, tax returns, loan agreements, and any other important signed documents. In addition, you should make sure to clearly separate your debt when it comes time for a divorce.


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The ideal is to clearly distinguish personal debt throughout the marriage. If you do have joint credit cards or loans, these should be paid off as soon as possible so the accounts can be closed, or else transferred to individual credit cards. Retaining jointly held debt in the midst of a divorce poses a significant risk to your personal assets.  

5. Ensure You Have Some Cash in a Personal Account

Divorces can be long and drawn-out procedures, and it might take months for the court to establish which assets legally belong to you. During this time, you want to make sure that you are not stuck without cash to cover your everyday expenses.

To avoid being left without any cash, you should immediately do what you can to transfer some money into an individual account. This will help tide you over until a settlement has been negotiated or the court has passed final judgments on the divorce. 

6. Use an Asset Protection Vehicle 

The aforementioned ideas are useful precautionary measures, and initial steps to take when faced with a divorce. However, by far the most effective line of defence to protect your personal assets from divorce, as well as other threats, is to use an asset protection vehicle.

There are numerous financial instruments which can be used to safeguard your personal assets, and better put them out of reach of vindictive spouses, creditors, and other legal liabilities. The most effective tool is that of an asset protection trust.

These are trusts which are specially designed to provide maximum protection and privacy to the assets which you transfer into it, and make it extremely difficult for third parties to lay claim to them. Specifically, an offshore asset protection trust formed in a favourable jurisdiction like Nevis or Cook Islands provides the utmost in asset protection, as they are far removed from domestic court rulings and state law.

A combination of an offshore asset protection trust and an offshore LLC (which is owned by the trust but controlled by you), is the best way to protect your personal assets from a divorce. Consider transferring a good portion of your personal estate into one of these vehicles long before you are faced with a potential divorce. 

7. Get Expert Support

It should be quite obvious that facing the difficulties and dangers of a divorce are impossible alone. You need to have a solid team of experts to help you through the process. First and foremost, this means hiring a competent divorce attorney.

In addition, you should get the guidance of a financial advisor who you trust, who can help you to set all the financial matters in order, and explain to you in simple terms the steps which you need to take. 

For more: How to Protect Assets After a Lawsuit is Filed


Divorces are one of those things that no one likes to imagine will happen to them, and for this reason they are often left unprepared. The unfortunate truth is that the odds of facing a divorce in your lifetime are much higher than you think, and so it pays to take the necessary steps and precautionary measures to protect your personal wealth.

Most of these strategies are far more effective if implemented long before you are actually faced with the reality of a divorce. This is why it is recommended to be proactive and take the necessary steps today to protect your assets from a divorce. 

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***Please Note: If you are a resident of a country that is a signatory of the Common Reporting Standard (CRS) (or a US citizen) your tax reduction possibilities are limited. Due FATCA, CRS, and CFC laws you may not be able to completely eliminate your taxes without moving your residence. While opening an offshore company can increase privacy and asset protection, your tax obligations remans tied to your ownership of overseas entities. Offshore company's are often not taxed in the country where they are incorporated, rather you as the owner are obligated to pay taxes in the country where you reside. Please make sure you know your tax obligations, as we are not tax advisors. Please seek a local tax professional for help regarding your situation. 

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