Postnuptial Agreements for Asset Protection

A postnuptial agreement is a contract between spouses that sets out how assets or liabilities will be allocated between them during a marriage and at death or divorce. This agreement offers spouses the opportunity to elect a different allocation than what is presented by default under state law.

For example, a judgment against a single spouse in Arizona can be enforced against that spouse’s separate property and also her share of the community property, which would include half of her spouses’ income. In community property states like Arizona and California, all property acquired during a marriage is community property and is owned equally by both spouses. The spouses in this example could use a postnuptial agreement to elect a different classification of their assets in order to place them beyond the reach of creditors.

The expected use for this planning strategy is to treat valuable assets as the separate property of the spouse facing the least risk from creditors. The agreement would need to satisfy a number of requirements to be valid but should also be recorded as to put potential creditors on notice of the change. If the asset has a title, that title will need to be changed in addition to the spouses executing the agreement.

Of course, there are other costs that must be weighed such as tax implications and the possibility of divorce, but the postnuptial agreement can be an effective asset protection tool if used correctly.

If you have questions about asset protection or postnuptial agreements, then please contact an experienced attorney at Nielsen Law Group for help. You can schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.