In our previous post we discussed prenuptial and postnuptial agreements and how these contracts can protect assets such as a small business from a divorce property division. Prenuptial and postnuptial agreements may not be a realistic option for some Georgia couples because some people may refuse to sign the agreements, and other people may be uncomfortable with the potential awkwardness of the financial conversation that surrounds these agreements.
There are alternative ways to protect your assets from divorce that do not require your future spouse’s consent. One of these options is a Domestic or Foreign Asset Protection Trust.
You can transfer your separate property such as a business into the trust. These trusts are generally effective for most incorporated entities such as C Corporations, LLCs, and limited partnerships, but may not work for an S Corporation. There are restrictions on what trusts can own stock in S Corporations and an experienced estate planning attorney will be able to advise a client on the best way to protect an incorporated business.
A trust can legally own property and therefore shield the property from the property distribution process after a divorce. You also do not need to wait until you are married to set up a trust. Setting up a trust early may prevent a divorce court from clawing back the assets of a trust and firmly establish that your company is outside of reach of a future ex-spouse.
Without a prenuptial agreement or a trust, your ex-spouse may acquire an ownership interest in your business regardless of whether the spouse helped run the business or who initiated the divorce, Forbes reports.
Source: Forbes: Divorce Dollars and Sense, “Divorce-Proof Your Business, Even If You’re Still Single Or Happily Married!” Jeff Landers, 4/19/11