How to Protect Assets From Divorce in Arkansas
Divorce can be an emotionally and financially draining experience, and one of the biggest concerns for people going through the process is how to protect their assets. In Arkansas, property division is governed by "equitable distribution" laws, which means that marital property is divided fairly, though not necessarily equally, between spouses.
Protecting your assets during a divorce requires a deep understanding of Arkansas law, careful planning, and strategic legal actions. In this blog, we’ll explore how you can take steps to safeguard your assets and reduce the financial impact of a divorce, as well as how a family lawyer can help.
Marital vs. Separate Property
The first step in protecting your assets in an Arkansas divorce is to understand the difference between marital and separate property. Marital property includes assets acquired by either spouse during the marriage, such as income, real estate, retirement accounts, and business interests. On the other hand, separate property consists of assets that either spouse acquired before the marriage, as well as gifts or inheritances received individually during the marriage.
The distinction between these two categories is important because marital property is subject to division, while separate property typically remains with the original owner. However, determining which assets are marital or separate isn’t always straightforward. Commingling—when separate property is mixed with marital property—can lead to disputes. For example, if you had a savings account before marriage but added money to it during the marriage, the court may consider it partially marital property.
Understanding how the court categorizes assets is key to protecting what’s rightfully yours. You’ll need to prove that certain assets are indeed separate and weren’t affected by marital contributions. Consulting with a family lawyer will give you an advantage.
Prenuptial and Postnuptial Agreements
One of the most effective ways to protect assets in a divorce is through a prenuptial or postnuptial agreement. These legal contracts outline how property and assets will be divided in the event of a divorce, offering clarity and protection for both parties.
A prenuptial agreement is made before the marriage, while a postnuptial agreement is made during the marriage. Both types of agreements can specify which assets will remain separate, even if they were acquired during the marriage. These agreements are particularly useful for individuals with significant wealth, business interests, or inheritances they wish to protect.
However, for these agreements to be enforceable in Arkansas, they must meet specific legal criteria. The agreement must be in writing, signed by both parties, and entered into voluntarily, without any pressure or coercion. Full disclosure of each spouse's assets is also required to secure fairness. Courts may not enforce an agreement if they believe one party was misled or if the terms are grossly unfair.
Protecting Business Assets
For business owners, protecting a company from the effects of a divorce is often a top priority. In Arkansas, business assets acquired or significantly improved during the marriage are typically considered marital property, even if the business was originally separate property. The value of the business is often divided between spouses, which can be a significant financial hit for the business owner.
To protect business assets, it's important to have legal protections in place. A prenuptial or postnuptial agreement can specify how the business will be treated in a divorce. Another strategy is to establish a trust that holds the business assets, separating them from personal property. Keeping thorough and separate financial records for the business is also essential, as commingling business and personal finances can make it harder to prove the business is separate property.
In some cases, if both spouses are involved in running the business, a buyout agreement might be necessary to make sure the business continues to operate smoothly after the divorce. No matter the case, having a family lawyer on your side is essential.
Keeping Inheritances and Gifts Separate
Inheritances and gifts are generally considered separate property in Arkansas, but they can become marital property if they’re commingled. For instance, if you use an inheritance to buy a family home, that inheritance might no longer be considered separate property.
To protect inheritances and gifts, it's important to keep these assets separate from marital funds. This means not depositing inherited money into joint accounts or using it for marital expenses. If you’re anticipating a significant inheritance or have already received one, discussing the matter with a family lawyer can help make sure that you’re taking the right steps to keep these assets protected.
Setting Up a Trust
Another effective method for protecting assets from divorce is to set up a trust. A trust is a legal arrangement where a trustee holds and manages assets on behalf of beneficiaries. Trusts can be used to protect family wealth, business interests, and real estate from being divided in a divorce.
One type of trust that’s commonly used for asset protection is an irrevocable trust. In an irrevocable trust, the assets are transferred out of your ownership and into the trust. Since the assets are no longer in your name, they generally can’t be touched in a divorce settlement. However, setting up an irrevocable trust requires careful planning, as it means giving up control over the assets.
Revocable trusts, on the other hand, don't offer the same level of protection in a divorce because you retain control over the assets. However, they can still be a valuable tool for estate planning and may provide some limited protections depending on how the trust is structured.
Maintaining Separate Bank Accounts and Financial Records
One of the simplest ways to protect your assets during a divorce is to maintain separate bank accounts and clear financial records. Keeping individual accounts for your earnings, inheritances, or other personal funds can help establish that these assets are separate property.
When finances are kept separate, it’s easier to show the court that certain assets weren't intended to be shared or commingled with marital funds. However, simply having separate accounts isn't enough to fully protect your assets—how the funds are used can also matter. For instance, if you use money from a separate account to pay for household expenses, a court may consider that money as part of the marital estate.
Having clear financial documentation that tracks the source and use of your funds can help protect your assets in the event of a divorce.
Protecting Retirement Accounts
Retirement accounts are another significant area of concern during a divorce. In Arkansas, retirement accounts, pensions, and 401(k) plans earned during the marriage are generally considered marital property and subject to division. However, retirement funds earned before the marriage or after the divorce filing may remain separate property.
To protect retirement assets, it’s crucial to document when the retirement account was established and how contributions were made over the years. Additionally, you may be able to negotiate with your spouse to retain full control of your retirement account in exchange for other assets, such as real estate or other financial holdings.
A qualified domestic relations order (QDRO) can be used to divide retirement assets without triggering tax penalties. Working with an experienced family lawyer is essential when dealing with nuanced retirement assets.
Here for You When You Need a Family Lawyer
While no one enters into a marriage expecting it to end in divorce, it’s important to be prepared for any outcome. By taking proactive steps to protect your assets, you can make sure that your financial interests are preserved, no matter what the future holds.
Divorce is challenging enough without the added stress of losing assets you’ve worked hard to acquire. With the right legal guidance and strategies, you can manage the process while keeping your financial security intact. That’s where I come in.
For the legal assistance you need, reach me at Watson Law Firm. I’m located in Harrison, Arkansas and serve Boone County, Newton County, Marion County, and Baxter County.
