If you’re staring down the face of an impending divorce, thinking you might lose your assets, you are not alone. There are hundreds of couples across Canada, who come across similar situations in their life. For them, protecting their real assets through a divorce can be a complicated financial process further reinforced by emotional devastation. Even though it might be an emotionally harrowing time, it is imperative that you do not lose sight of the bigger picture and protect yourself, your kids, your finances, assets, properties, etc.
The initial step for everyone going through a separation will be to hire a family lawyer who is highly proficient with the laws for dividing assets in your state. Relevant legal counsel will be invaluable in supporting your claims to assets and can also assist you with finding the right appraisers and accountants to help your case. A family divorce lawyer can also help you on how to terminate any Powers of Attorney presented to your spouse for control of your property and finances.
How Can You Protect Your Real Assets During a Divorce Process?
When it comes to asset protection during a divorce, proper planning is not about keeping assets or finance a secret from a soon-to-be-former spouse. Nor is it about lying or providing misleading allegations in court. Rather, it should be focused on properly declaring your assets and discussing with your spouse in advance how to divide them. Here are some ways you can protect your assets even before you begin the divorce proceedings.
Make Sure Your Exclusions Remain Excludable
During a divorce, make sure to exclude the value of certain items when you are calculating the net family property value. Such items may include gifts from third parties, medical compensations, inheritances, and life insurance proceeds. When you obtain funds from any of these sources, you must ensure that these are kept separate from all of your other property. Otherwise, you may end up losing your exclusion.
Since the burden of proof is on you to present to the court that you are entitled to exclusion, detailed proof can help protect your assets. Therefore, if you feel that a divorce is sure to happen sometime in the future, make sure you keep detailed records and proof of all the financial transactions involving excluded property. Then, if you ever have to go through a divorce, you have the required documents to prove that certain items or property are to be excluded. This is one method in which you can protect your assets because if you cannot prove the exclusion, you will not get it.
Make Sure Your Deductions Remain Deductible
When calculating the value of your net family property, you are permitted to deduct your net worth on the day of your marriage. In some cases, especially after years of marriage, the spouse may not remember what he/she owned on their marriage day, much less be able to prove it. Therefore, if you hope to take advantage of a deduction, keep a record of the value of your assets on the day of your marriage. Similar to the exclusions, the burden of proof on the deduction is also up to you to prove. If you are unable to prove that you are entitled to the deduction, then you may not acquire it.
Think Before Buying the Matrimonial Home
Your matrimonial home will always be divided equally between you and your soon-to-be-ex, no matter what. Since a matrimonial home is one of the largest assets most couples own, the value of a matrimonial home is an exception to the laws and will be equally divided between both parties. Therefore, to protect your assets, be careful about which funds you leverage to purchase your matrimonial home. If you buy the home using the fund from the excluded property you will end up losing your exclusion. Similarly, when buying a matrimonial home, you should also make sure that you have other assets at least equivalent in value to what your net worth was on the day of marriage. Otherwise, you might also lose your deduction for this.
Use a Marriage Contract
Signing a marriage contract is by far one of the best strategies you can utilize to protect your assets during a divorce but it might not be a pleasant one. If you’re beginning a second marriage, or if you have considerable assets, you may not appreciate the manner in which the law divides your assets when you separate. By signing a marriage contract earlier into the marriage, you and your spouse decide on how you will separate the assets if by any chance you have to divorce in the future.
As mentioned earlier, it is not a pleasant one because negotiating a contract even before marriage will have an impact on even the best relationships. Not every spouse will feel that this is the right thing to do as you begin a beautiful journey together. But if both of you have been in unstable relationships before, then maybe you can discuss it and come to a conclusion. Also, keep in mind that family law sets specific limits regarding what you can include in a marriage contract. And if the agreement is not adequately drafted by an experienced family law lawyer or a divorce lawyer, then it may not be valued in court.
These are some of the steps that you should consider to protect your assets from divorce long before your marriage starts to deteriorate. If you hasten and do this during the divorce, the court could find that you acted in an unconscionable manner. This could end up really bad for you because the court could award your spouse a larger share of the assets. In addition to these methods, a family divorce lawyer can suggest more sophisticated methods to protect your assets during and long before a divorce. So make sure you consult with a family divorce lawyer initially before going ahead with an option on how to protect your assets.