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How to Protect Your Inheritance From Your Spouse During Divorce
It is a sad fact of life that not every marriage lasts forever, so it makes sense to prepare for a possible separation as early as possible. While this may seem distasteful at best, the reality is that it helps to cut down on the stress if you do get divorced and end up in prolonged negotiations and/or disagreements.
Prenups help everyone, allowing the family to keep the focus on protecting each other and healing during what is already a traumatic time. When it comes to those you love, even those you are feeling bitter toward at the moment, you won’t regret starting with the attitude that you are starting a divorce not a war. Protecting your inheritance at the earliest possible time is just a way to be proactive.
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Community vs. Separate Property
All states have their own rules as to how mutual property is dealt with in a divorce. Arizona is a community property state, meaning that any property accumulated during the marriage is presumed to be shared by the partners. Everything is basically put into a big marital pot, owned equally by both partners.
If, for instance, one partner has a business that was started during the marriage. that makes millions of dollars, the other partner also has a share of those millions of dollars by virtue of the marriage. If you own a house that was purchased during the marriage and titled in both partners names, the house is yours together.
When you separate, the law requires an equitable division of assets. You won’t have to cut the house in half, but you will need to find a fair way to allow both partners to get half the value of the house and all the other marital assets. There are a few exceptions, which we can help you with if we represent you during your divorce proceedings.
Any inherited property or gift that you want to keep out of the marital pot must be kept separate. The question of how to keep inheritance separate property will vary partly depending on when you got the property. You may have come into an inheritance before the marriage, or another kind of large gift while you are married. One of the keys to protecting your inheritance is making sure that the funds are never co-mingled with the assets you share with your spouse. Once they make it into the marital pot, they typically become shared property.
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How to Protect Your Inheritance From Your Spouse By Using a Trust
Trusts are a relatively inexpensive way to manage and control assets while protecting their ownership. Arizona is a state that respects trusts, and a well-made trust is almost impossible to interfere with or break. Many people are using trusts as part of the estate planning process because they can manage and protect their assets without risking them falling into the wrong hands or being the subject of estate taxes and fees.
Having your assets in trusts makes it easier for your loved ones if you pass and they need access to funds to take care of a funeral or even just living expenses. With a trust, you become the owner that decides how the assets are distributed. You can decide to spend the money or pass the trust on to someone else while you are still alive. If you die while the trust is still intact, control of the trust will transfer directly to your named successor trustee to administer the distribution of your estate in the manner in which you direct.
You can use a trust to keep certain assets separate from marital property. That property is usually an inheritance or a gift, and many families use this method to make sure certain assets stay within a family. There may even be conditions on the assets that they must stay within the family so you would need to separate the property to fulfill the requirements of receiving the assets.
When using a trust, you can designate anyone you want to be the beneficiary, including your siblings, your children, or others. Even if you learn of an inheritance or a gift while you are married, you will be able to protect it from your marital pot provided you do not mix the inheritance or gift with your community money.
Whether or not you have decided to use a trust to protect an inheritance, you may want to consider speaking to an experienced attorney about planning your estate. Many individuals put off estate planning, thinking nothing will happen to them right now and they have all the time in the world. You can sit down with an attorney and make all those important decisions now to save your loved ones the pain and stress of dealing with it in the future.
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How to Protect Inheritance From Divorce by Using Prenuptial Agreements
Arizona allows two individuals who are thinking about getting married to enter into a prenuptial agreement beforehand. The prenuptial agreement covers both rights and responsibilities of both parties not just in the event of a divorce, but sometimes also in the event of one of the partner’s untimely death.
Most married couples who enter into a premarital agreement do so to address a perceived imbalance in assets. Usually, it is because one partner has significantly more money or a strong business asset, and much of the time the agreement helps to protect children who are already born.
The agreement must be entered into with eyes wide open by both parties; there must be full disclosure of all assets before the parties sign away rights. Both parties tend to be strictly protected by the courts so one cannot take advantage of the other’s lack of experience or resources.
You can use a prenuptial agreement to protect any assets you possess before entering into the marriage, including an inheritance. Inherited property is one of the assets many people agree isn’t really a marital asset as long as it hasn’t become part of the community property in the marriage. As long as you follow the rules carefully, you may be able to include in your prenuptial agreement an inheritance you are expecting to receive in the future.
A prenuptial agreement is basically a contract, but the state of Arizona looks at each one very carefully. If you are considering entering into a premarital agreement, or if you need help defending or modifying one, you should utilize the assistance of an experienced divorce attorney in Scottsdale, AZ.
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Take Control and Protect Your Future
The lawyers at BTL Family Law know that choosing the right divorce attorney is a personal matter. This is why you will never feel any pressure during your consultation. We are here to answer your questions, discuss your options, help you understand your rights, and, if we represent you in your divorce, our lawyers will guide you through every step of the process as efficiently as possible. We work to keep costs low so that you can start this new chapter of your life in the best position possible.