A common question we hear from our clients, especially the clients with a high net-worth, is “how do I protect my assets in divorce?” The short answer is, it depends. Indiana follows an equitable distribution of property theory upon divorce, which means that property is divided in a “just and equal” manner, not necessarily a 50/50 division. However, there is a presumption that a “just and equal” division is a 50/50 division. Individuals looking to avoid a 50/50 division of assets have several options they can pursue to protect their assets. In this blog, we provide a brief overview of the division of property in a divorce and look at how millionaires can protect their assets.
Upon divorce, Indiana divides what is known as “marital property” between the parties. Marital property is property owned by either spouse, regardless of if the property was acquired before the marriage or during the marriage. Nor does it matter if the property is titled in only one of the spouse’s names, or if it is jointly titled. All property is presumptively marital property. This means that if you started a business or inherited a lot of money, whether it be during the marriage or before, it is marital property. With it being marital property, there is a good chance that your assets will be divided between yourself and your soon to be ex-spouse, unless you take certain steps to protect your assets.
One way an individual can protect their assets during a divorce is to enter into a premarital agreement (sometimes called prenuptial or antenuptial agreement) before marriage. Premarital agreements provide many benefits to parties, with one of the biggest being asset protection. A premarital agreement is a contract. As such, parties are free to contract with each however they so choose, albeit, subject to a few exceptions. This allows individuals to protect their assets they bring into the marriage by coming to an agreement beforehand. In addition, individuals can also protect future assets, such as an inheritance. Ultimately, premarital agreements offer a great way to protect your property upon divorce, while also avoiding interference by the court.
Another way an individual can protect their assets during a divorce is through what is called a post-nuptial agreement. Unlike a premarital agreement, a post-nuptial agreement is an agreement between the parties after the marriage. A postnuptial agreement operates in a similar way to a premarital agreement in that, often times, postnuptial agreement focus on how assets will be divided by the parties in the event of a divorce. However, unlike premarital agreements, postnuptial agreements are more thoroughly scrutinized by the courts, and as such, can be found invalid much more often than premarital agreements. Nonetheless, if you didn’t enter into a premarital agreement, a postnuptial agreement is a good avenue to explore.
Finally, a third way an individual can protect their assets during a divorce is overcoming the presumption that a 50/50 division of property would be just and reasonable. Indiana Code 31-15-7-5 lists several factors a court can consider when determining whether a 50/50 division would be “just and reasonable.” There are five different factors listed in said statute that a court can rely on. If an individual is able to show to the court that the factors weigh in favor of an unequal division, then you may be able to persuade the court that you should retain full ownership of your business.
These types of situations are extremely fact sensitive. Divorces are emotional times for all involved. Not only are they emotional, but often time complex, especially when it comes to property division. Obtaining skilled counsel is key to relieving some of the burden that comes with divorce. This blog was written by attorneys at Dixon & Moseley, P.C. who handle divorces of all types throughout the state. It is written and posted for general educational purposes and is not to be construed as legal advice or solicitation for services. It is an advertisement.