Statistics show that roughly half of first marriages end in a divorce, and the divorce rate for second and third marriages climbs even higher. For many people in Colorado, protecting assets that they owned before a marriage is important.
It is common for assets you owned before a marriage to become marital property during a marriage. Marital property is assets that can be divided between spouses in the event of a divorce. If you built a business before you got married, any growth it experiences during the marriage will often be considered marital property in a divorce. For those that would prefer not to share their business after a divorce, a recent Forbes article offers a few tips to protect it.
Getting married? Get a prenup
A prenuptial agreement is the most well-known option in this situation. In a prenup, you and your future spouse can outline plans and expectations in case you end up wanting a divorce down the road. During negotiations, you can arrange to keep the business you worked hard to build. Some people, however, are uncomfortable with the idea of planning for a divorce before they are married. In that case, there are other options available.
Protect your assets with a trust
A domestic or foreign asset protection trust is a way to protect your business, or other assets, without having to consult your partner. It may even be a good option for people who are single but are still interested in protecting a business down the road. An asset protection trust places ownership of the business with the trust. Since the trust technically owns the business, it cannot be considered when dividing property in a divorce.
No prenup? Try a postnup
Finally, if you are already married, but did not get a prenuptial agreement, a postnuptial agreement could be helpful. Postnuptial agreements are very similar to prenuptial agreements except they are completed after a couple is married. While they are sometimes contested in a divorce, postnuptial agreements can be better than having no protection at all.
Source: Forbes, “Divorce-Proof Your Business, Even If You’re Still Single Or Happily Married!” Jeff Landers, 19 April 2011