Divorce is almost always a messy process. Even in the best of circumstances, where you and your soon-to-be ex-spouse agree that splitting up is in your best interests, there are a million different questions to ask regarding bank accounts, property splitting, and who gets to keep the family dog.
You’ll also need to determine how the assets you share will be split up when you both go your separate ways.
Since dragging your divorce to court can be costly in both time and money, it’s a good idea to do some research on this beforehand so you and your spouse can iron out any kinks before you approach a judge with a mutually agreeable decision.
General Property Principles in the United States
Divorce laws – and many laws affecting how assets are split up or awarded to divorcing partners – can vary heavily from state to state.
Getting divorced in one state is not always the same experience as getting divorced in another. That said, many states follow a handful of general divorce law principles, which impact divorce proceedings throughout the US.
Marital Property vs. Separate Property
In the majority of US states, there’s a distinct difference between marital property and separate property. Most states also only require marital property to be divided in divorce.
Marital property is any money or assets that either spouse earned or acquired during the marriage. The only exception to this is when you both previously signed a prenuptial agreement, which might state something different.
So, for example, say that you own a house before getting married to your current spouse. In most states, when you get divorced, you’ll still own the house and your spouse won’t have any claim to it.
But what if you and your spouse purchased real estate together? In that case, you and your spouse will have to decide who gets it (and who gets compensated for their share of the equity) or when you will both sell it.
Separate property usually includes:
- Any property that a spouse owned before they got married
- Any inherited property your gifts to one spouse
- Some proportion of personal injury awards
Of course, this can get messy and complicated if you commingle your funds into a single bank account.
Equitable Property Division
The majority of states also follow equitable division rules. This kicks in when a judge divides marital property during divorce proceedings.
Unfortunately, this leaves who gets what property up to the judgment of your local court, not necessarily what’s in your best interest.
It also doesn’t mean that marital property will be split exactly equally. Instead, judges often distribute property based on what they believe is equitable or fair depending on the circumstances of your case.
Judges typically consider the following factors when performing equitable property division:
- The debts and liabilities of each person
- The contributions both spouses made to the other’s education or career
- Which spouse, if any, contributed mostly to childcare
- The economic circumstances of both spouses
- Tax consequences from dividing property
- The behavior of one spouse or another (e.g., did one spouse waste marital assets or show a disregard for property value?)
Again, there’s no telling that equitable property division will go your way. It’s entirely possible that a judge will side with your ex-spouse in such a division and give them the majority of your wealthy estate or valuable assets.
Keep in mind that nine US states also currently follow community property rules for determining the ownership of marital assets. These states include:
- New Mexico
In the above nine states, both spouses are set to share joint ownership for all marital property, which is also called community property. Therefore, any community property will be equally divided between the spouses in the event of a divorce.
Florida, Kentucky, and Tennessee allow couples to opt into a community property legal system through the creation of a special trust.
So, Can You Divorce Without Splitting Assets?
Now let’s return to the primary question: can you divorce your spouse without necessarily splitting the valuable assets you have? The answer: it depends. In some cases, you can, and in other cases, you might be forced to give up marital property. Let’s take a closer look.
You Own Key Assets
If you own key assets, and you owned them before getting married to your spouse, you shouldn’t need to give those assets up unless you are required to liquidate the assets to pay your spouse for something.
For instance, if you have a prized vehicle or a retirement account and you had both of those assets prior to getting married, they should be safe, even if the judge tends to side with your ex-spouse in the divorce proceedings.
You Pay Your Spouse for the Assets
Alternatively, you can pay your spouse for valuable assets, though this does require you to give money. Say that you and your spouse both purchased the family home you’ve lived in for several years. However, you believe that the property is likely to appreciate over the next 10 years.
Your spouse isn’t overly interested in selling the property or keeping it, so you offer to buy out your spouse’s equity. In the process, you become the sole owner of the house and don’t have to literally split the property down the middle.
You Get a Status-Only Divorce
In some states, you can get a status-only divorce. With a status-only divorce, a judge issues a divorce decree that legally ends your marriage, but the judge doesn't handle the distribution or separation of marital assets.
The judge doesn't tackle any other issues related to the dissolution of your marriage, in fact.
In California, for example, if a spouse requests it, a judge can hold a separate hearing to determine whether they will grant a status-only dissolution of the marriage.
If the judge agrees, the spouses get divorced and handle asset distribution and assignment between themselves. This is most common if both spouses appear to be working well together and are mutually agreeable about who owns what.
When Do You Have to Split Assets in a Divorce?
If none of these circumstances apply, you will have to divorce while splitting any shared or marital assets between you and your spouse. Anything that you purchased after your marriage could be theoretically on the line!
It doesn’t matter if you purchased, say, a piece of prized artwork with your money. If your spouse also worked during your marriage and contributed to the shared income you both had, a judge or lawyer could theoretically say that they “helped” to pay for the artwork, particularly if you used a joint bank account to make a purchase.
Never assume that any property you purchase or acquire after your marriage is safe from seizure. It’s for this reason above all that you should look into asset protection now, preferably well before you get married!
Asset Protection is Always Wise
Because there’s no guarantee that you won’t be able to keep any marital assets in the event of a divorce, and because prenuptial agreements are far from the ironclad papers that they appear to be, you should invest in asset protection now rather than later.
Asset protection involves safeguarding your assets, like liquid capital, investments, and properties, against a variety of potential threats. These include lawsuits, creditor claims, and even divorces. When you work with Dominion, we’ll help you devise an effective asset protection plan that often involves placing key assets into an offshore trust.
When your assets are in the right trust, they won't be claimable by your ex-spouse or by any other legal opponents.
Say that you divorce your spouse, and the judge decides that you need to pay your soon-to-be ex-partner $3 million. If you don't have the $3 million in your bank accounts, you won't be able to do that.
What if you have $3 million in an offshore trust? The trust owns the money, not you! Because of this, the court can’t compel you to give up that cash to your ex-spouse, effectively preserving your estate from being diluted or depleted by the actions of a bitter former partner.
That's the kind of safety and security that asset protection can provide. Think of asset protection as a preventative measure or shield around your assets in case you decide to divorce your partner in the future. You hope that you won't have to, but as the saying goes: hope for the best, plan for the worst.
Contact Dominion for More Information
Even if you and your spouse agree on how to split up shared property, you might find that the divorce proceedings don’t go as you plan. In the worst-case scenarios, valuable assets ranging from liquid capital to investment accounts to real estate could go to your ex-spouse instead of staying in your possession.
That's why you should get in contact with Dominion's experts for asset protection strategizing. At Dominion, we help high-net-worth individuals safeguard their assets not just against lawsuits and creditors but also against the possible side effects of divorces. To learn more, speak to one of our representatives today.