Partnering & Referring Attorneys

Keeping What’s Yours: A Guide to Asset Protection in Divorce

Practice Areas

Contact Us today

Reach Out Now

Lead generation form (sidebar)

"*" indicates required fields

This field is for validation purposes and should be left unchanged.


How to protect assets from divorce is a pressing concern for anyone considering or facing a separation. The emotional and financial impacts of divorce can be overwhelming. But understanding some key steps can help safeguard your assets. Here’s a quick outline:

  • Identify owned property: Know what you and your spouse own.
  • Valuate your assets: Get a clear idea of worth.
  • Separate your finances: Open individual accounts and keep records.
  • Understand state laws: Familiarize yourself with marital property laws in your state.
  • Be mindful of taxes: Consult professionals to understand tax implications.

Divorce isn’t just a legal process; it’s an emotional roller coaster. No one enters into marriage expecting to part ways, but considering that almost half of U.S. marriages end in divorce, preparing for the financial implications is crucial. The division of assets can become a contentious issue, leading to stress and financial strain if not handled correctly.

Simple infographic depicting steps to protect assets in divorce: 1) Identify ownership, 2) Valuate assets, 3) Separate finances, 4) Understand state laws, and 5) Consider tax implications. - how to protect assets from divorce infographic step-infographic-4-steps

Understanding Marital vs. Separate Property

When thinking about how to protect assets from divorce, it’s crucial to understand the difference between marital and separate property. This knowledge helps you navigate the complexities of asset division and protect what’s rightfully yours.

Marital Property

Marital property includes assets accumulated during the marriage. This can range from salaries and bonuses to real estate and investment accounts. Even if an asset is in one spouse’s name, it may still be considered marital property if it was acquired during the marriage.

For example, let’s say Jamie earns a salary of $250,000 annually while Austin is a community volunteer. Despite Jamie being the sole earner, the $250,000 would still be considered marital property. This is because it is deemed to accumulate through the joint efforts of both spouses.

Separate Property

Separate property refers to assets that one spouse owned before the marriage or received individually as a gift or inheritance, regardless of when it was received. This type of property is generally not subject to division in the event of a divorce.

Consider Austin again. If Austin’s grandmother leaves him a bequest of $2 million, that amount is considered separate property. Even if Austin and Jamie divorce, the $2 million should remain with Austin, provided it hasn’t been commingled with marital assets.

Community Property

In some states, property is categorized as community property. This means that all property acquired during the marriage is owned equally by both spouses. States like California and Texas follow this rule. In these states, marital property is typically split 50/50 upon divorce.

Equitable Distribution

Other states follow the principle of equitable distribution. This means that marital property is divided in a way that is fair but not necessarily equal. Courts consider various factors like the length of the marriage, the financial situation of each spouse, and contributions to the marital estate.

For example, if Jamie and Austin live in an equitable distribution state, the court might decide that Jamie should receive a larger portion of the marital assets, considering Jamie’s higher earning potential.

Why Understanding These Categories Matter

Knowing how property is categorized can help you make informed decisions and protect your assets. For instance, keeping separate property distinctly separate and not commingling it with marital assets is crucial.

Assume Austin puts his $2 million inheritance into a joint account with Jamie and they later add $1 million of marital funds. If they spend $1 million from this account, it becomes challenging to determine how the remaining $2 million is categorized. This can lead to disputes and complications during divorce proceedings.

Understanding these distinctions is the first step in protecting your assets. Next, we’ll explore legal strategies like prenuptial and postnuptial agreements to safeguard your property further.

How to Protect Assets from Divorce

Prenuptial Agreements

A prenuptial agreement is a legal contract signed before marriage. It outlines how assets, income, and debts will be divided if the marriage ends. This agreement can protect assets you owned before the marriage and specify terms for spousal support.

Imagine Sarah and Tom, who both have significant assets before marriage. They sign a prenuptial agreement to keep their properties separate. Years later, if they divorce, the agreement ensures they each retain their original assets, avoiding lengthy court battles.

Key Benefits:
Legal Binding: Once signed, a prenuptial agreement is legally enforceable.
Clarity: It provides clear terms for asset division and financial distribution.
Peace of Mind: Knowing your assets are protected can reduce stress.

Postnuptial Agreements

If you missed the chance to sign a prenuptial agreement, a postnuptial agreement is an option. This contract is similar but signed after marriage. It can address new financial circumstances or changes in the relationship.

Consider Emma and Jack, who didn’t sign a prenup. After a few years, Emma starts a successful business. They decide to draft a postnuptial agreement to protect Emma’s business assets. This agreement ensures that if they divorce, Emma’s business remains hers.

Important Points:
Legal Effectiveness: Like a prenup, a postnup is legally binding.
Update Financial Changes: It can be updated to reflect significant financial changes.
Clear Terms: Establishes clear expectations and reduces conflicts.

Separate and Joint Bank Accounts

Maintaining separate bank accounts can help protect your assets. Here’s how:

  1. Open Individual Accounts: Keep your pre-marriage assets in accounts only in your name.
  2. Avoid Commingling: Don’t mix marital funds with separate funds. This keeps your separate property clear.
  3. Transparent Communication: Inform your spouse about your financial arrangements to avoid misunderstandings.

For instance, Alex receives an inheritance and keeps it in a separate account. He avoids using this account for marital expenses. This strategy ensures that the inheritance remains his separate property.

Monitoring Joint Accounts:
Track Expenses: Keep an eye on joint accounts to ensure fair use.
Coordinate Payments: If you share bills, plan how to manage payments without mixing funds.

Keep Records: Maintain detailed records of all financial transactions. This helps prove which assets are separate if disputes arise.
State Laws: Be aware that laws vary by state. Some states have specific rules about asset division. Consult a legal expert to understand your rights.

By using prenuptial and postnuptial agreements, maintaining separate accounts, and keeping detailed records, you can protect your assets during a divorce. Next, we’ll delve into legal strategies like trusts and beneficiary changes to further safeguard your property.

Legal Strategies and Considerations

Using Trusts for Asset Protection

Trusts can be a powerful tool to protect your assets during a divorce. There are different types of trusts, each with unique benefits and drawbacks.

Irrevocable Trusts: These trusts cannot be changed once established. By placing your assets in an irrevocable trust, you remove them from your control, making it harder for them to be considered marital property.

Domestic Asset Protection Trust (DAPT): Available in certain states, DAPTs allow you to be the beneficiary of a trust you create. This can shield your assets from creditors, including a divorcing spouse. States like Delaware and Nevada are popular for DAPTs due to their strong asset protection laws.

Offshore Trusts: These provide the highest level of protection but can be complex and expensive to set up. Offshore trusts are established in foreign jurisdictions with strong asset protection laws, making it difficult for creditors to reach your assets.

Trusts and Asset Protection - how to protect assets from divorce

Case Study: In the 2015 case of Pfannenstiehl v. Pfannenstiehl, a Massachusetts court initially ruled that the husband’s trust assets were subject to division in a divorce. However, the Massachusetts Supreme Judicial Court later overturned this decision, reinforcing the protection of trust assets in divorce cases.

Changing Beneficiaries and Ownership

After a divorce, it’s crucial to update the beneficiaries on your financial accounts and insurance policies.

Retirement Accounts: Change the beneficiaries on your 401(k), IRA, and other retirement accounts to ensure your ex-spouse does not receive these assets.

Life Insurance: Update your life insurance policy to name a new beneficiary, such as your children or a sibling, to prevent your ex-spouse from benefiting.

Estate Planning: Review and update your will and any other estate planning documents to reflect your new wishes. This may include changing the ownership of certain assets.

Expert Tip: John Mantia, co-founder of PARCO, advises, “We have seen it happen many times where clients forget to change their beneficiary forms. They die, and then their family learns that an ex-spouse gets a lot of benefits that otherwise would not have gone to them.”

Seeking Professional Legal Advice

Navigating a divorce can be complex, especially when it comes to protecting your assets. It’s essential to seek professional legal advice to ensure you’re taking the right steps.

Divorce Attorney: A skilled divorce attorney can guide you through the process and help you understand your rights and obligations.

Financial Advisor: A financial advisor can help you manage your assets and plan for your financial future post-divorce.

Estate Planning Attorney: An estate planning attorney can assist with setting up trusts, updating your will, and making other necessary changes to protect your assets.

Fact: Olivia Summerhill, a divorce money consultant, emphasizes the importance of considering tax implications when dividing assets. For example, $875,000 in a 401(k) and $875,000 in a checking account may seem equal, but the 401(k) funds will be taxed upon withdrawal, making the distribution unequal.

By using trusts, updating beneficiaries, and seeking professional legal advice, you can better protect your assets during a divorce. Next, we’ll answer some frequently asked questions about protecting assets in divorce.

Frequently Asked Questions about Protecting Assets in Divorce

What is the first step in protecting assets when considering divorce?

The first step is to identify and document all your assets. This includes everything you and your spouse own together and separately. Make a comprehensive list of:

  • Shared investment accounts
  • Vehicles
  • Primary home or residence
  • Bank accounts
  • IRAs and 401(k)s
  • Retirement accounts
  • Personal property
  • Real estate
  • Pensions
  • Business equity or proceeds
  • Cryptocurrency

Understanding what you own helps in planning how to protect it. Also, be aware of your state’s laws regarding asset division. Some states have community property laws, meaning marital assets are split 50/50. Others follow equitable distribution, which may not be an equal split but what the court deems fair.

How do prenuptial and postnuptial agreements protect assets?

Prenuptial agreements are contracts signed before marriage. They outline how assets and debts will be divided if the marriage ends. This agreement can protect premarital assets, inheritances, and even future income.

Postnuptial agreements are similar but are signed after marriage. They can update financial arrangements as circumstances change. Both types of agreements must be fair and entered into voluntarily to be enforceable.

Example: If you own a business before marriage and want to keep it separate, a prenuptial agreement can specify that the business remains solely yours. If you didn’t get a prenup, a postnuptial agreement can still protect that business.

Are inherited assets protected in a divorce?

Inherited assets are generally considered separate property and not subject to division. However, they must be kept separate from marital assets.

Key Tip: If you inherit money, do not deposit it into a joint account. Keep it in a separate account in your name only. Commingling inherited funds with marital funds can make them subject to division.

Case Study: In Illinois, if you inherit a house and keep it solely in your name, it remains your separate property. But if you add your spouse’s name to the deed, it becomes marital property and can be divided.

By understanding these key aspects, you can take proactive steps to protect your assets during a divorce. For more detailed guidance, consider consulting a legal professional.


Divorce can be one of the most challenging experiences in life, both emotionally and financially. But with the right strategies and professional guidance, you can protect your assets and secure your future.

At OC Elder Law, we specialize in helping individuals navigate the complexities of asset protection during divorce. Our experienced attorneys understand the nuances of family law and are committed to providing personalized legal support tailored to your unique situation.

Future Planning is crucial. It’s not just about protecting assets during a divorce; it’s about securing your financial well-being for years to come. Whether through prenuptial agreements, postnuptial agreements, or trusts, we can help you create a comprehensive plan that safeguards your interests.

Maintaining family harmony is another essential aspect. Divorce can be divisive, but with thoughtful planning and clear communication, it’s possible to reduce conflict and preserve relationships. Our goal is to help you reach an equitable outcome while minimizing stress and discord.

Legal support is invaluable. Navigating the legal landscape alone can be overwhelming and fraught with potential pitfalls. Our team at OC Elder Law is here to guide you through every step, from understanding state laws to managing tax implications and changing beneficiaries.

Taking proactive measures now can make a significant difference in the future. Contact us today to discuss how we can help you protect your assets and secure a fair and favorable outcome in your divorce proceedings.

For more detailed guidance and to explore our services, visit our asset protection page. Let’s work together to keep what’s yours.

Twilio Form

Please let us know what's on your mind. Have a question for us? Ask away.