How to Protect Assets from Divorce in Pennsylvania
Sept. 30, 2024
Divorce is often one of the most challenging situations a married couple can experience. Many questions typically arise, such as how will marital assets be divided and how can you protect your assets during a divorce.
At Iwanyshyn & Associates, we are experienced in handling family law cases and we understand the challenges involved in protecting your assets during a divorce.
Pennsylvania has specific laws and regulations regarding the division of property and assets in divorce, an experienced family law attorney can help you better understand your options and the avenues available for protecting your assets.
Understanding Equitable Distribution in Pennsylvania
In Pennsylvania, the division of marital property falls under the principles of equitable distribution, which means that assets are divided fairly, though not necessarily equally. Unlike some states that follow community property rules where everything is split 50/50, Pennsylvania courts consider a variety of factors to determine what is fair. This often includes:
The length of the marriage
The income and earning potential of each spouse
The contributions each spouse made as a homemaker
The acquisition of assets before and during the marriage
The standard of living established during the marriage
Marital vs. Non-Marital Property
The distinction between marital and non-marital (or separate) property plays a significant role in which assets would be subject to division during a divorce. Generally, assets acquired during the marriage are considered marital property and are thus subject to division.
However, assets owned before the marriage, inheritances, and gifts are typically regarded as non-marital property, provided they have been kept separate from marital assets. Keeping a detailed record of your assets can help substantiate your claims regarding non-marital assets.
How to Protect Your Assets During a Divorce
Certain strategies and techniques can help protect your assets during a divorce in Pennsylvania. These commonly include signing prenuptial and postnuptial agreements, creating specific trusts and asset protection strategies, and using business and professional practices.
Prenuptial and Postnuptial Agreements
A proactive approach for safeguarding your assets often involves prenuptial and postnuptial agreements. A prenuptial agreement is a contract between two spouses that is signed before marriage, outlining how assets will be divided in case of divorce.
A postnuptial agreement is created after the marriage has taken place but before the couple files for divorce, outlining asset division and financial responsibilities in case of separation or divorce.
In Pennsylvania, these agreements can significantly influence asset protection if they are executed properly. They allow you to have control over your financial future rather than relying on state laws and are especially useful for individuals who have significant assets or children from previous relationships that they want to protect.
However, it's essential to note that agreements cannot be used to waive child support or custody rights, and they must be entered into voluntarily by both parties with full disclosure of assets.
Asset Protection Trusts
Creating a trust is another effective way to protect your assets during a divorce. In Pennsylvania, irrevocable trusts can provide greater asset protection than revocable trusts. The assets placed in these trusts are considered separate property and are not typically included in the equitable distribution process.
Additionally, setting up an offshore trust where Pennsylvania laws may not apply can further safeguard your assets. However, it's crucial to work with experienced professionals when creating these types of trusts as they can have complex tax and legal implications.
Creating a sound asset protection plan with the assistance of a financial advisor or attorney can also help safeguard your assets during a divorce. This may include protecting your assets through insurance policies, creating LLCs or partnerships, and transferring ownership of certain assets.
Establishing Clear Financial Boundaries
Clear financial boundaries can help protect your assets effectively. By creating separate accounts and maintaining accurate records of your assets and liabilities, you can prevent marital property from becoming commingled.
Commingling can often transform what was initially considered non-marital property into marital property. Therefore, consistent account management and financial independence can help you better protect your assets during a divorce.
Business and Professional Practices
If you or your spouse is a business owner or part of a professional practice, these assets may be subject to division. It’s essential to have the business accurately valued. However, there are specific steps you can take to shield these assets from division during divorce proceedings.
By creating shareholder agreements, implementing buy-sell agreements, or using trusts to protect your professional practice, you can lessen the impact of your divorce on your business and help mitigate additional risks. It's also important to keep clear and concise business records, which can be used to advocate for asset protection during your divorce.
How to Protect Retirement Accounts
Retirement plans and pensions are often among the most significant assets in a divorce. Proper division requires careful consideration of marital and non-marital assets and drafting a Qualified Domestic Relations Order (QDRO). This strives to ensure the equitable division of retirement benefits without incurring penalties under Pennsylvania law.
The essential steps for safeguarding retirement accounts in Pennsylvania include:
Identify marital vs. non-marital assets: Identify whether your retirement accounts, such as 401(k)s, IRAs, and pensions, are considered marital property. Contributions made during the marriage are typically viewed as marital property, while those made before marriage are generally considered separate.
Gather documentation: Collect comprehensive documentation of your retirement accounts, including statements that show the value at the time of marriage and at the time of separation. This will help distinguish what portion of the account may be subject to division.
Draft a Qualified Domestic Relations Order (QDRO): A QDRO legally recognizes a spouse's right to a portion of the other spouse's retirement plan and allows for the transfer of part of the retirement assets without penalties.
Consult with an experienced divorce attorney: Financial advisors and attorneys can help identify strategies to minimize the impact of asset division. An attorney can provide guidance on structuring settlements and understanding tax implications.
Experienced Legal Support You Can Trust
Every divorce case presents unique challenges, and having continuous support is vital. For residents in Pennsylvania who are going through a divorce, our attorneys at Iwanyshyn & Associates offer experienced advice and representation tailored to meet your individual needs.
We understand that protecting what is rightfully yours is of utmost importance. Reach out to us today to schedule a consultation. Located in Allison Park, Pennsylvania, we serve clients throughout Pittsburgh, Wexford, Cranberry, and Gibsonia.