Family law issues can have repercussions in many areas including personal finance. Recently Jeffrey Verdon, managing partner of the Jeffrey M. Verdon Law Group, shared possible strategies affluent families may wish to explore before or after a divorce.
Q. What general advice would you suggest for a high net worth individual who has just gone through a divorce, had their assets significantly decreased due to same, and needs to ensure their remaining assets are protected for themselves and children against creditors and potential litigants? After all, through the family law proceedings, much financial information is typically disclosed.
A. After a divorce, it is a good time to revisit the estate plan. At that time, it can be prudent to consider a more comprehensive plan that incorporates one of the many effective tools for protecting assets against unknown, unexpected and unforeseen creditors. This can even include a future spouse who ceases to be a spouse at some point in the future.
Q. What advice would you give to a high net worth individual who needs asset protection, and is concerned that a divorce filing might be on the horizon?
A. This one is tricky. Community property is off limits. Separate property of the transferor spouse should be placed in an offshore asset trust and placed outside the reach of the Family Law Court’s jurisdiction.
Q. Why should a party who has just gone through a divorce consider the use of off-shore asset protection strategies? What does this entail?
A. An offshore trust allows the transferor to place separate property beyond the jurisdiction of the any U.S. court as the foreign country under which the trust is established will not recognize judgments from the U.S.
Q. What is the biggest mistake you see from newly divorced clients regarding their assets?
A. The biggest mistake is typically failing to create an asset protection plan after the divorce.
Q. Is it important to have both a will and a trust and how are they affected by divorce?
A. A will and a trust should be created in conjunction. Whenever a family unit changes it is essential to remove the former spouse from all of the estate planning documents.
Q. Why is it important to update your estate plan in contemplation of, or post-divorce?
A. Removing any reference of a prior spouse will ensure the estate does not pass on to him/her. Plus, this is an optimum time to implement a more robust estate plan designed to protect assets from a future or unforeseen and unexpected creditor.