Asset Protection

How to Protect Assets from Divorce

October 8, 2023
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8 min read

In a perfect world, every marriage would work out in perfect harmony. But whether you’ve already been married and are trying again, or are getting married for the first time but are aware of modern divorce rates, you know that's often not the case. 

It's not unreasonable or cynical to think about how to protect your assets from divorce, especially if you're a high-net-worth individual and you're getting married to someone with significantly less in terms of property or liquid cash.

In these cases, you might default to a prenup or prenuptial agreement. Truth be told, though, a prenup might not be the best way to protect your assets from divorce. An asset protection trust could be a much better option – let’s take a closer look to learn why.

Prenuptial Agreements – Not the Best Ideas

A prenuptial agreement or premarital agreement is a legal arrangement that defines the rights and responsibilities of both partners in an upcoming marriage if that marriage ends via death or divorce. In most cases, it’s used to determine:

  • Who owns what assets or property in the event of the marriage’s dissolution
  • Whether one or both partners will be forced to pay alimony or other monetary awards if the marriage dissolves for whatever reason

On paper, a prenup might seem to be a great idea. But in reality, a prenup can bring much more trouble than it’s worth to the marital table, even before you and a future spouse have tied the knot.

Downsides to Prenuptial Agreements for Asset Protection

When you and your spouse sign a prenup, you participate in a highly complex and controversial engagement. For starters, both you and your partner have to hire your own lawyers, who will advocate for you as individuals. This is a difficult negotiation by itself, and many believe that it starts the marriage off on the wrong foot, from a place of adversity instead of cooperation.

This can be bad whether you and your spouse come from different wealth levels or from similar ones. If you, for instance, have much more wealth than your spouse, they may think poorly of you and wonder whether you think they’re just after you for the money. 

If you and your spouse have relatively equal assets, a prenup can still leave a sour note between the two of you on your wedding day. After all, aren’t you supposed to be equal partners in everything and share what you have?

On top of that, prenups aren’t nearly as legally secure compared to asset protection trusts. Again, prenups might seem ironclad on paper; if the prenup says that your spouse doesn’t get the house, you should be set, right?

In fact, a prenup is still somewhat subject to interpretation from a judge. If your spouse says, for example, that they are “used to a certain lifestyle,” they may be able to sway a judge into interpreting a prenuptial agreement such that you end up having to pay or give more of your assets than you initially intended.

So even aside from the potential damage a prenup can do to your union before it’s finalized, a prenuptial agreement can’t really be trusted to protect your assets from divorce when push comes to shove.

Asset Protection Trusts – Superior Alternatives

An asset protection trust is a far better choice. In a nutshell, an asset protection trust is a specialized, premium trust vehicle developed by experts like Dominion. With the right asset protection trust, you can put assets into a secure vehicle far from the reach of legal attacks, including those that might be levied against you by a bitter, soon-to-be ex-spouse.

Benefits of Asset Protection Trusts

With an asset protection trust, you are not the trustee or the beneficiary. Therefore, an opponent can't legitimately say that you have access to any of the assets included in the trust. 

Not only does this protect you against an ex-spouse, but it also protects you against any other potential financial threats, including:

  • Creditors
  • Lawsuit plaintiffs
  • Tax officers
  • Business partners
  • And more

In this way, when you set up an asset protection trust, you don’t just guard that wealth against the possibility of divorce. You shield your assets against a variety of threats all at the same time. 

Not only is that economically more efficient, but it’s also a wise idea if you have assets worth protecting in the first place (i.e., you have a net worth of $10 million or more – at this stage, you really should be taking advantage of trusts for a variety of reasons). 

Asset protection trusts are also not subject to interpretation the same way that a prenuptial agreement is. Furthermore, if your asset protection trust is set up in an offshore jurisdiction effectively and wisely, there may be no way for a judge – even a highly motivated one – to get access to the trust for interpretation in the first place.

Why Are Asset Protection Trusts Effective During Divorce?

An asset protection trust is effective for protecting your wealth in divorce for the same reason it’s effective in protecting your wealth against some other lawsuit or legal action: it removes those assets from your control and even from your legal jurisdiction.

Because of this, even if a judge were to find that you owe your spouse some amount of money or property, they could not compel you to give up the assets contained within the trust.

To understand this, consider the fact that a marriage is essentially a contract that applies to a single country. When you get married in the US, the US is the primary authority that recognizes that marital union. It might still be observed in other countries, but it's only legally binding in one place.

In a US divorce, your ex-spouse might have a claim to the property you have within the US. This is not the case for any assets or wealth that you store in an offshore jurisdiction.

Here’s an analogy to explain it even further – imagine that you set up a business in the US. To do business legally and properly, you have to adhere to US rules, regulations, tax laws, etc. If your business is sued for whatever reason, the lawsuit plaintiff can come after the wealth and assets you have in the US. That’s not the case for any offshore asset you store in a well-prepared APT. 

Assets stored in an offshore trust are not necessarily subject to the rules or jurisdiction of the US. It all depends on how the trust is set up, whether the bank in question has branches in your home jurisdiction, and a variety of other factors. But when it is drafted properly, a trust can be the most effective and most secure place for you to store your assets in the short and long terms alike.

Setting Up an Asset Protection Trust with Dominion

Thanks to the comprehensive protection offered by an asset protection trust, an APT could be the perfect way to safeguard your assets against an ex-spouse’s aggressive claims. Dominion can help you set up an offshore asset protection trust for this reason and more.

There’s a reason why we’re trusted by wealthy entrepreneurs, doctors, and other individuals, and it's because we get results. With our assistance, your assets will be protected against not just divorce proceedings but any other legal attack, like a lawsuit.

There’s no reason not to get started right away, especially if you don’t already have a trust set up. Contact us today to get started.


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