Kevin Qualls Family Law
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Using trusts to protect assets

California couples may find it difficult to plan for the possibility of divorce. However, for those interested in protecting personal finances, it is important to accept the possibility and plan accordingly. In many cases, couples choose to create a prenuptial agreement. Prenuptial agreements, while useful in some cases, can be thrown out or overturned by the courts in some situations. For those with significant wealth to protect, the possibility of a prenuptial agreement being overturned can spell financial disaster.

However, there is another method that offers a more advanced wealth protection. That method is known as the domestic asset protection trust. Initially, DAPTs helped the wealthy shield their assets from creditors. Fortunately, the trust also protects assets from spouses during divorce. The trust works by establishing an irrevocable trust, which is a trust that cannot be altered or eliminated. Usually, irrevocable trusts work by preventing owners of assets from actually accessing them.

These trusts avoid that restriction by designating the owner of the valuables as a discretionary beneficiary. He or she is thus allowed to partially access the funds, but they remain fully protected. However, the devices do face some restrictions. For example, because only 15 states allow for the formation of a DAPT, it can be hard for individuals who live outside those states to include real estate in the instruments.

Prenuptial agreements and DAPTs are only two ways that a person might prepare for a divorce. A lawyer may be able to help someone who is seeking to end a marriage protect assets from property division. That lawyer could also provide advice and guidance through negotiations with the other party.

Source: Forbes, "How To Protect Yourself In A Divorce Using A Domestic Asset Protection Trust", Robert Pagliarini , May 15, 2014

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