Protecting your assets in the event of a Birmingham divorce may be easier here than in most states, but it still requires a fair amount of prior planning.
As any Alabama divorce lawyer will tell you, we live in an equitable distribution state, which means that property is distributed in an "equitable fashion." This doesn't necessarily mean down-the-middle, 50-50.
One of the reasons property division is becoming more of an issue these days is because people are getting married later in life. The median age for a first-time bride is now 26.5 years and the median age for a groom is 28.7 years. That means that people have more time to accrue their own individual wealth prior to the marriage.
Many people will want to hang onto those assets in the even that they split – as nearly half of all Americans do within the first eight years of marriage.
While there are exceptions, for the most part, if the property in question was acquired during the marriage, it is considered marital property. Meanwhile, property obtained prior to or expected to be received after the divorce is considered to be the property of the individual.
One exception to this, however, could be if such property was used for the benefit of both spouses during the course of the marriage. So let's say you bought a house prior to the marriage, but then both lived in it for the duration of your marriage. That house may still be considered marital property.
In some cases, a couple will have made their own arrangement regarding division of property in a premarital agreement, also known as a prenup. Historically, those arrangements have been rare, though they are slowly becoming more common. Usually, this is the best way to protect assets.
The problem with them is that many people find it difficult to approach their soon-to-be-spouse with one. This is why they remain outside the norm.
But there is another way to preserve your pre-marital assets. It's called a self-settled trust. It allows you to place your assets into a trust that can be used for your sole benefit. Ideally, you would set this up before you have any creditors – including a spouse or soon-to-be-ex spouse.
The laws on this vary from state-to-state. In some cases, you can set them up during the marriage, and in other cases, you don't have to inform your spouse about them at all.
This is generally an advisable option when you have made a successful career for yourself before you have gotten married.
But you should be advised it's not as full-proof as a prenuptial agreement. There is a possibility that your soon-to-be-ex could claim that the trust, if they know of it, should be included in the marital estate.
There may be some cases where you would want to consider something called a Delaware statutory trust. This is a trust that is formed in order to hold either property or business to the benefit of a single trustor. In particular, this is a good option for entrepreneurs. Usually, it's an alternative to the formation of a limited liability company. However, if you are concerned that your spouse may try to name your firm as part of a marital asset, having it named as a DTS will mean that in order to claim anything against the trust, he or she would have to bear an income-tax liability – regardless of whether there is a distribution.
That might not be enough to bar your spouse from seeking it anyway, but it could be potentially used as a bargaining chip for you. As in, this would probably not be a beneficial asset for you, but perhaps we can discuss other alternatives to meet your demands.
If you are contemplating a divorce in Birmingham, contact Family Law Attorney Steven Eversole at (866) 831-5292.
Divorce Trusts, May 18, 2013, By Tatiana Serafin, Barron's Penta