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Leveraging the power of a trust to protect non-marital assets

For Greenville residents, having a conversation with a significant other about a prenuptial agreement can often be awkward and bring out negative emotions. However, protecting assets before entering into a marriage can be very important should things go wrong.

A prenuptial agreement is not always an infallible asset protection device. Spouses often contest them during a divorce, and litigating that contest can be very expensive. A good alternative or companion to the prenuptial agreement is known as a Domestic Asset Protection Trust. This is useful for protecting non-marital property from creditors and ex-spouses. This is due to the fact that the trust is irrevocable. Traditionally, a revocable living trust would allow creditors to reach in and take what is deemed theirs. The irrevocable asset protection trust keeps the assets safe, and because the owner of the assets is also the discretionary beneficiary, they can still access what is in the trust.

Currently, this type of trust is only available in just over a dozen states, with North Carolina not among them. For North Carolina residents, the trust can be created in one of the states where it is legal. However, not all assets are necessarily wise choices in this situation. Real property that is located in a state where a DAPT is not recognized could still be reached by creditors. Therefore, experts say that the type of assets appropriate for a DAPT are things like cash, stock and similar types of non-real property.

While few people anticipate getting a divorce before the actual marriage, smart preparation can save a lot of trouble later on. An attorney with experience in issues of divorce and property distribution may be able to help create a plan that protects a person's non-marital assets at the end of a marriage.

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

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