The time to start thinking about protecting your assets isn’t during a divorce but well before your marriage goes bad. Unless you can reach an agreement with your spouse about how to divide property, the judge will take the matter out of your hands and issue a decision after a trial. Your spouse is entitled to a share of marital assets by law, so even if she agrees in writing to give you everything, the court probably won’t honor the agreement because it would be unfair.
Your Separate Property Is Yours
If your assets are your separate property, you don’t have to worry about protecting them because they’re normally exempt from the divorce process. Separate property is anything you owned before you got married and that you took care to maintain separately from marital assets. It also includes gifts or inheritances made to you alone during the marriage. Some states consider personal injury proceeds to be a spouse’s separate property, so if you purchase something with this money and title the asset solely in your name, it typically remains your separate property. Your spouse has no right to any of these assets. Otherwise, anything acquired during the marriage is subject to distribution in a divorce.
Avoid Commingling Property
Protecting your separate property begins the moment you acquire it. Your assets can lose their separate property status if you commingle or transmute them during the course of your marriage. Commingling involves mixing the asset with marital funds. For example, if you had premarital, separate real estate but used marital income to pay the taxes, mortgage, upkeep and maintenance, you’ve commingled the property. Your spouse may now have a right to a portion of its value. Transmutation occurs when you take some action that converts an asset from your sole name into joint names with your spouse. The law considers that you’re making a gift to your marriage and the asset then becomes marital property. In some states, an asset is only considered transmuted if you and your spouse sign a document stating that the transfer is intended as a gift. If you can trace the initial value of a commingled asset, some courts will allow that its value as of the date of the marriage or the date that commingling began is yours. In this case, you won’t have to share this portion with your spouse.
Prenuptial and Postnuptial Agreements
The safest and most surefire way to protect assets in a divorce is to reach a clear agreement with your spouse as to what’s yours, what’s hers and what property is marital. You must commit the agreement to writing, sign it and have it notarized. The most common way of doing this is to prepare a prenuptial agreement before you get married, but courts honor postnuptial agreements as well -- no law says you can’t determine these things after you tie the knot. Contractual agreements between spouses usually override state laws if the terms are not grossly unfair to one party.
Don't Try to Hide Assets
Resist any temptation to brush a few assets under the carpet if you’re headed for divorce court. The legal pitfalls of doing so are numerous. Contested divorces involve discovery, the process of sharing information under oath regarding assets, debts and income. You might also have to answer written questions, produce certain documents or testify in person in a deposition. If you lie or conceal anything, it’s perjury and perjury is a criminal offense. At the very least, the court can award a disproportionate share of the assets to your spouse, giving her more than 50 percent, or sanction you with fines.