How to Protect Assets From Divorce
Financial security during divorce is not just about protecting your wealth; it's about ensuring your ability to build a stable future for yourself and your loved ones. Understanding how assets are divided in a divorce and what steps can be taken to protect them is paramount. Configuring what assets are divided, which ones are not, and what you can do to protect them will help provide clarity.
Assets That Are Divided in Divorce
Rhode Island is an equitable division state when it comes to divorce. This means marital property is divided in a manner that the court deems fair, which does not necessarily mean equal. The following may be divided fairly:
Primary Residence: This is often one of the most significant assets to be divided in a divorce. The court may decide to award the property to one spouse, or the property may be sold and the proceeds divided.
Vacation Homes or Rental Properties: Any real estate properties acquired during the marriage are considered marital assets and will be divided as part of the divorce settlement.
Vehicles: Cars, boats, motorcycles, and other vehicles purchased during the marriage are subject to division.
Bank Accounts: Joint checking and savings accounts are typically divided during a divorce. However, even individual accounts could be considered marital property if the funds were earned during the marriage.
Retirement Accounts: Retirement funds, including 401k plans and IRAs, are divisible assets in a divorce. The specific division depends on various factors, including the length of the marriage and each spouse's financial contributions.
Taxable Investment Accounts: Any earnings from joint investment accounts are considered marital property and will be divided accordingly.
Business Assets: If a business was started or grown during the marriage, it is usually considered a marital asset. Determining the value of a business for asset division can be complex and often requires professional valuation.
Pensions or Annuities: Similar to retirement accounts, pensions or annuities amassed during the marriage are likely to be divided in a divorce.
College Savings Accounts: If there are college savings accounts set up for children, these are also considered in the asset division process.
Antiques or Collectibles: Tangible property, such as antiques, artwork, jewelry, and collectibles, are also considered marital assets if acquired during the marriage.
Understanding all the types of assets that can be divided in a divorce is crucial. It ensures a fair distribution and helps both parties move forward with clear expectations. The Law Offices of Howe & Garside, Ltd can provide comprehensive guidance during this complex process.
Assets That Are Not Divided in Divorce
While many assets acquired during a marriage are subject to division in the event of a divorce, there are certain types of assets that typically remain separate and are therefore not divided. Some examples include:
Pre-Marital Assets: Only the appreciation during the marriage of any property owned by one spouse prior to the marriage is considered marital, as long as it hasn't been commingled with marital assets.
Inheritances: If one spouse receives an inheritance during the marriage, this is usually considered separate property and is not divided in a divorce, as long as it hasn't been commingled with marital assets.
Gifts: Gifts given specifically to one spouse, whether from the other spouse or a third party, are generally not divided in a divorce.
Personal Injury Settlements: Compensation received from personal injury claims is typically considered separate property, unless it's compensation for lost wages, which would be considered marital property.
Assets Acquired After Legal Separation: If the spouses have legally separated and one spouse acquires new assets, these assets are not typically divided in a divorce.
Assets in a Special Needs Trust: These trusts are designed to protect assets for individuals with special needs and are typically not subject to division in a divorce.
Assets Designated for Charitable Giving: If assets have been specifically designated for charitable giving, they may not be divided in a divorce.
Assets Held in Guardianship: Assets held in guardianship for minor children or incapacitated individuals are usually not subject to division in a divorce.
The Law Offices of Howe & Garside, Ltd, serving clients throughout all of Rhode Island including Newport, Providence, Warwick, Bristol, Westerly, Woonsocket, Lincoln, Cumberland, Pawtucket and more, advise that it's crucial to understand which assets may be considered separate property in a divorce, as this can significantly impact the financial outcome.
What You Can Do to Protect Your Assets
A few strategies to help you plan for a successful financial future include:
Establish a Prenuptial Agreement: Before entering into marriage, consider establishing a prenuptial agreement. This legal document specifies asset entitlements and support in case of divorce, potentially simplifying the division of assets process.
Understand Property Distribution Rules: Familiarize yourself with the property distribution rules in your state. In Rhode Island, for instance, the principle of equitable distribution applies, which means assets are divided in a manner that’s fair but not necessarily equal.
Create an Inventory of Assets: Compile a list of all jointly and individually owned assets. This should include bank accounts, retirement accounts, investment accounts, real estate properties, and personal belongings.
Consult With a Divorce Attorney: It's essential to seek professional advice before making significant financial decisions, such as withdrawing funds from joint accounts or attempting to hide assets. The Law Offices of Howe & Garside, Ltd can provide expert guidance on these matters.
Consider Changing Beneficiaries: If you have retirement accounts, you might want to consider changing your beneficiaries if the divorce has not been filed yet. Also, look into obtaining a Qualified Domestic Relations Order (QDRO) for the division of 401k assets.
Establish Credit in Your Own Name: If you don't already have credit in your own name, now is the time to establish it. This can help ensure your financial independence post-divorce.
Gather Financial Records: Compile all your financial records for the past three years, including bank, investment and retirement accounts. This can help provide a clear picture of your financial situation.
Consider a Post-Nuptial Agreement: Even if you didn't establish a prenuptial agreement, you could still consider a post-nuptial agreement as a precautionary measure.
It's always best to seek professional legal advice when going through divorce and asset protection since each case is different.
Legal Guidance You Can Trust
Understanding the intricacies of asset division during a divorce can be complex, but with the right information and professional guidance, you can get through this process more confidently. The Law Offices of Howe & Garside, Ltd is here to support you every step of the way, providing experienced legal advice tailored to your unique circumstances.