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Ways to protect finances in high asset divorce

Texans who have been involved in a divorce know that things can start amicably and then turn messy when money is involved. This is especially true in high asset divorces. When a large sum of money is at stake, the spouses may feel compelled to fight over it to make sure they each get their fair share. However, one concern is that there won't be enough money to provide for beneficiaries. What many people might not know is that there are options to protect money for children and grandchildren.

An offshore asset protection trust is a good way to save money for heirs and ensure that are taken care of financially. This type of trust can be easily created with the help of multiple parties, such as an attorney, accountant and financial adviser. A bank serves as trustee of the account, while a friend, family member or other trusted person serves as a caretaker of the trust to ensure that the funds are being used properly. The client then drafts a letter specifying how the money is to be spent - for example, for college education, medical expenses or other needs.

The client can also set up a limited liability company (LLC) and move assets there. Once assets are placed here, they cannot be withdrawn. They can be invested, however. This is because the company is owned by the offshore trust, not the client.

When a life event threatens the assets, the LLC can be collapsed by the offshore trust. The assets from the LLC then go to the trust. So in the case of a divorce, the client can ask the trustee of the offshore trust to collapse the LLC. The assets are then no longer owned by the client, so they cannot be divided up in a divorce proceeding.

Although this seems like a viable strategy for many clients facing a divorce, it's costly to set up. Fees can exceed $100,000, so it's best suited for someone with $25 million or more in assets. A divorce lawyer can help clients come up with other strategies to protect hard-earned assets.


Source: 
Wall Street Journal, "Protecting Assets in a Messy Divorce" V. L. Hartmann, Oct. 04, 2013

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