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How Do I Protect My Assets In A Divorce?

Posted on April 26, 2021 by Chris Kirker

Many people considering a divorce worry about their financial future after splitting from their partner. They may have a valuable business that they don’t want to split up, or a sentimental piece of family property that they want to protect. Without proper planning, these assets might be divided in a divorce, or even given entirely to the other spouse. However, the following considerations can help protect valuable assets in a divorce and maximize a divorcing spouse’s share of marital property.

It is important to note that Texas is a community property state. This means the initial presumption is that spouses are entitled to equal shares of any property they acquired during their marriage. Because both spouses have an interest in community property, if one spouse tries to hide property from the other, they will be guilty of fraud and have to forfeit some of their own property. This can reduce the assets a fraudulent spouse receives in a divorce decree.

That said, Texas still allows spouses to own separate property – property owned entirely by one spouse in which the other has no interest. However, any spouse claiming a piece of separate property will have to prove that it is separate property, such as showing that they acquired it before the marriage or got it by gift or inheritance. If an individual fails to prove that an asset is separate property, it will be characterized as community property, and it will be split between the spouses. This can result in one spouse losing a share or even half of an asset that should have been entirely theirs. 

Spouses can help set themselves up for the possibility of divorce by being intentional about their financial planning and diligent about keeping records throughout the marriage. Making sure to keep any separate property separate from community property, such as by holding it in a separate account and not depositing your income into the account, will help trace your separate property so that you can prove it is not a community asset that needs to be divided. Similarly, keeping statements showing the value of the asset at the time of marriage and showing the transactions in and out during the marriage will help making tracing this property easier. Finally, keeping track of any money spent on the other spouse’s separate property, such as paying the mortgage or renovations on their pre-marriage house or investing into their pre-marriage business, will help preserve your claims for reimbursement. And vice-versa, keeping track of any money spent on community assets by your separate property will preserve those claims as well.

In the event of a divorce, any decree will have to identify all the property owned by the spouses and all of the debts owed by the spouses, regardless of whether it is separate property or community property. This is necessary so that all property can be clearly awarded to one spouse or split between them. If the decree leaves out a piece of property, one spouse may lose their interest in it completely or be unable to prove in the future that their spouse does not have an ownership interest in this asset. This makes it important to fully disclose and identify all assets so that they can be protected moving forward.

With some forward thinking, pre and post-marital agreements can alter the default rules referenced above. They can do things such as designating what would have been community property as separate property, waiving certain claims in a divorce, and specifically identifying certain assets as own spouse’s or the other’s. These agreements can specify that a business started by one spouse is their separate property, determine what will happen with the house in the case of divorce, or set rules so spouses can protect future investments or business ventures that don’t even exist yet. Pre and post-marital agreements can be helpful tools for protecting certain assets from being split up, but they will normally have to be executed well before either spouse considers filing for divorce.

Finally, it is important to remember that any individual going through a divorce will have to give up some of the assets they had access to during the marriage. It is inevitable that when an estate shared by two people is split, your share after divorce will look different and smaller. Prioritizing the assets each spouse would most like to keep – and the assets they would have the least trouble giving up – can help individuals focus their negotiations and give them bargaining chips during negotiations with the other party. 

A skilled divorce attorney can help identify marital assets, draft nuptial agreements, and protect your assets in a divorce. If you would like to learn more about asset protection measures, please contact Kirker|Davis today.

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