How to protect your assets from divorces and creditors: Lessons from 'Big Little Lies'
I have been watching an HBO show called Big Little Lies, which is a fantastic show, but also has some lessons on estate planning. [Spoilers!] In a recent situation this season, a character named Renata (on the left in the photo above) learns that her husband is in trouble for insider trading, and that because of the way they own their assets as a married couple in the state they live in (California), everything they have is at risk and they must declare bankruptcy and sell off everything that the bankruptcy trustee tells them to sell—their home, Renata’s wedding ring, everything. To make matters worse, Renata finds out at the bankruptcy hearing that her husband has been procuring sexual favors from the nanny and promising her additional compensation for her services. This is all a huge blow to Renata, who came from a poor background, worked for everything she built, and is now having everything taken away due to her husband’s actions.
Let’s discuss a few ways that you can protect your assets from situations like this. The article continues below. If you would prefer to watch a video on this instead, watch here:
1. Prenuptial agreement
Prenuptial agreements (often referred to as ‘prenups’) are signed before the parties enter into marriage to outline the disposition of assets in the event of divorce, death, or a creditor situation. Many people fail to sign prenups because they get married before either party has any assets, but they are a very good idea for people who enter a marriage already owning assets. In Renata’s situation, a prenup may have allowed her to keep half the assets.
2. Partners should be a team on finances and assets
Many partners fall victim to financial issues because they put all of the responsibility for handling finances and assets onto one of the partners. Both partners should be involved in financial matters. We have our clients maintain a family spreadsheet that they update over time and review every three years to see what changes have taken place. Each partner should have all of the login info for all accounts and check in regularly.
3. Keep separate property separate
Many states, like Oregon, are separate property states, and as long as you keep your property separate, it is treated that way legally. If you go into a marriage with assets or if you receive an inheritance, those assets are considered your separate property. The trouble is that many people tend up commingling property and it then becomes marital property. Keeping separate property separate can protect that property for you in situations like Renata’s.
4. Asset protection trust planning
There are numerous ways that you can use asset protection planning with trusts. Some people put all or most of their assets into asset protection trusts. But there are more common ways that people use trusts to protect their assets. I use two methods just about every day, and both are within a revocable living trust. The first way is setting up your estate plan so that if you die, your assets are held in trust with your surviving spouse receiving income, but the principal protected for your children after your spouse dies. This means your kids’ inheritance isn’t at risk if your surviving spouse remarries or has money problems. The second way is setting up your estate plan so that when your kids receive their inheritance, it is protected for them in an asset protection trust, so that they are not vulnerable to creditors and predators.
Keep these points in mind if you are worried about protecting your assets from creditors and predators. But do not forget the most important point, which is to call your estate planning lawyer immediately.
If you want to get started on your estate plan, read about our estate planning services and schedule an appointment.
To your family's health + happiness.
~Candice N. Aiston
P.S. Want to get started slowly but surely, naming guardians for your kids? Check out our Guardian Plan kit.
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Candice N. Aiston is an Legal Planning Attorney for Estates + Businesses in the Portland, Oregon area. She helps people to prepare for a lifetime of security, prosperity, and guidance. If you would like to receive her free reports, please visit http://aistonlaw.com/ to sign up. Follow her Facebook page for daily planning tips: https://www.facebook.com/aistonlaw/.