Often, one spouse earns more than the other. This wealth disparity opens up a range of issues during a marriage and especially during a divorce. While no one wants to anticipate divorce, it is a good idea to plan to protect assets in case the marriage heads south.
During a divorce, a couple divides their shared marital assets. In the best of times, couples face challenges as they divide real estate property, business assets, and other valuable property. During a heated divorce, the process is even more complicated, and sorting out whose property is whose can quickly bog proceedings down into frivolous arguments.
When you earn more money than your spouse, consider the following:
Maintain separate accounts
By keeping separate bank accounts and credit lines, you protect your financial history and maintain independence. This also may make it easier to differentiate between marital assets and individual assets.
Discuss the situation with your spouse
Open and honest communication might prevent future problems. Spouses may agree to a prenuptial agreement to clearly define ownership of individual assets and property.
Create a prenuptial agreement
When possible, create a prenuptial agreement. The agreement should clearly define ownership of each asset either you or your spouse own. Be sure your prenuptial agreement is created voluntarily without coercion, is based on full disclosure about assets, and is witnessed and written. Each party should involve their own legal counsel.
Consider a postnuptial agreement if you’re already married
A postnuptial agreement is like a prenup, only it is created and signed after you get married. It is less ideal than a prenuptial agreement, as some states do not recognize postnuptial agreements – though Florida typically does if it’s created properly. For a postnup, it is of particular importance that the agreement is witnessed and written by attorneys.
Consider forming a trust if you’re a business owner
In addition to a prenuptial or postnuptial agreement, you may choose to put your business assets in a trust. A domestic or foreign asset protection trust transfers ownership of your property into the trust. Forming a trust is easier with some corporate structures than others, and it is most common with limited partnerships, limited liability companies or C-corporations.
Take the right precautions
Often one spouse comes into a marriage with more income excessive alimony payments or protecting hard-earned business assets. Communication and careful planning may protect assets and ease the way in the event of a divorce. The right precautions make it easier to move on with your life once the divorce is finalized.