How To Protect Your Assets From Divorce

A common concern among divorcing couples is how each spouse can protect their hard-earned assets from being awarded to the other person. In California, property division means a 50/50 split if a divorce case goes to trial, whether or not this is fair for either party. Luckily, there are actions you can take to protect your assets as much as possible during a divorce.

1. Avoid Commingling

California’s community property law views every married couple as their own community. Any property acquired during the marriage will become part of the community, and therefore equally owned by both parties. If a divorcing couple cannot reach a property division settlement themselves, the matter will go to trial, where the courts will give each spouse 50 percent of the community property regardless of whether this is fair or equitable.

However, separate property and gifts or inheritance are not part of the community. They are protected from California’s community property laws. If you keep funds, assets and property that you acquire during your marriage separate, it will be protected and prevented from going to your spouse in a divorce. You will need to prove that the item is separate property for this to work.

Maintaining separate property requires avoiding the commingling of assets. Commingling means to mix or combine the separate property of a spouse with marital or joint property. An example is a joint bank account. Commingling can make it difficult to distinguish between the two in the event of a divorce. Keep your personal property separate, and use your own separate bank account to purchase any other assets you wish to keep separate.

2. Use a Transmutation Agreement

If it is too late to avoid commingling your assets during your marriage, you may be able to use a transmutation agreement to protect them. Also known as a marital property agreement, a transmutation agreement is a legal document that changes the classification of community property to separate property. This type of agreement can be used to clarify which spouse owns a specific asset and to more clearly define each spouse’s property interests.

3. Create a Prenuptial or Postnuptial Agreement

A prenuptial agreement is a legally binding document that is signed prior to marriage and goes into effect on the date of the marriage. It specifically lists which assets will be given to each party in the event of a future divorce. A postnuptial agreement is similar, except it is created and signed after the couple has already gotten married. These documents are tools that you can use to protect your assets from California’s community property laws.

Attempt to Reach a Settlement

The California courts allow a couple to come up with their own property division agreement first before a case goes to trial and the community property laws are applied. With assistance from an attorney, you and your spouse may be able to collaborate and achieve an amicable agreement on property division terms that work for both of you. This may be possible with settlement negotiations, mediation or arbitration.

Hire a Divorce Attorney to Protect Your Assets

Do not attempt to hide assets during a divorce case in California. This is not an advisable method of protecting them, as they will most likely be discovered during financial disclosures and subsequent investigations. If you are caught attempting to hide assets, you could face civil and even criminal penalties. Instead, work with a highly experienced divorce lawyer in San Diego to help you come up with effective and creative ways to legally protect your assets.