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Irrevocable trust may provide asset protection in a divorce

Divorcing couples in Texas must wrangle with many decisions when navigating through the end of a marriage. Whether a high asset divorce or otherwise, property division is commonly one of the most hotly contested portions of many a divorce. In some cases, identification of separate and marital property may be clear but that cannot be counted on. Prenuptial agreements can be effective means of simplifying decisions about property division during a divorce but many couples do not have such contracts in place.

When a prenuptial agreement has not been created, married couples do have other ways of guarding against some losses during a divorce process. One is through a postnuptial agreement and another is through a form of irrevocable trust called a Domestic Asset Protection Trust. Not every state offers the DAPT but residents from states that do not offer this form of trust can have one created in a state that does. A caveat here is that any real property, such as a home, could not be included in a trust that resides out of state.

The DAPT can guard against both creditors and spouses having access to a person’s assets. Some states, however, outline some exceptions that may prevent spouses from being blocked by the trust. Nevada is the one state that does not have any exceptions and therefore offers the maximum level of asset protection. The creator of a DAPT can be designated as the beneficiary so that he or she retains the assets but is at no risk of losing them. A DAPT can be used in conjunction with a prenuptial agreement as well.

People who are contemplating divorce may want to talk with an attorney before any action is taken. Doing this can give input on how best to stay protected during this difficult experience.

Source: Forbes, “How To Protect Yourself In A Divorce Using A Domestic Asset Protection Trust,” Robert Pagliarini, May 15, 2014

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