Divorce with Debts

Everyone seems to understand that divorce involves the division of marital property and assets.

However, over the years, I have found that many people fail to fully appreciate that divorce involves the division of debt, as well.

Divorce with Debts

Ironically, debt is typically cited as one of the top reasons couples split up. But, getting divorced doesn’t make those troublesome debt problems “magically” disappear. In fact, it’s exactly the opposite. Just as debt can often play a major role in the failure of a marriage, it can also play a major role in adding stress and contention to divorce proceedings.

What can you do minimize nasty debt headaches during your divorce? My best advice is to be prepared. Educate yourself about debt, in a broad sense. Then, gather all the relevant data about your specific case.  You’ll want to collect credit card bills, information from your mortgage/home equity/auto loan accounts, etc. and learn all you can about what you and your spouse owe.

In addition, here are a few tips to help you better understand how to handle dividing debt in your divorce:

  1. Where you live impacts how debt will be divided.Divorce laws differ from state to state, and how your debt will be divided depends largely on where you live and whether you live in a Community Property State or an Equitable Distribution State.

There are nine Community Property States: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Couples living in Alaska can “opt in” for community property, and Puerto Rico is a community property jurisdiction.

The remaining 41 states are known as Equitable Distribution States (or Common Law States). Utah is one of these. In Utah, the court will try to either split the debt in half or perhaps do some creative offsets; but most of the time, if the debt was for and in behalf of the “marital estate”; then, the debt will be divided by both parties.

(An earlier post discusses the differences between Community Property States and Equitable Distribution States in more detail.)

In general terms, if you live in an Equitable Distribution State, debt that’s incurred during a marriage is the joint responsibility of both parties, provided both parties are co-signers on the account (mortgage, credit card, etc.). In other words, if your husband opened a credit card account in his name only, then only he is responsible for that debt.

In Community Property States, both spouses are responsible, even if only one incurred the debt.

Of course, once you and your husband have separated, the rules change. Any debt incurred after you separate is the sole responsibility of the person who made the charges. The wrinkle here is that “the moment of separation” varies from state to state. In some states, you need to legally declare a separation. In others, a legal separation is not required; you’re separated once you start living apart.

  1. It’s often best to eliminate shared debt.Our firmusually advises women to eliminate shared debt before the divorce is final. Naturally, that may mean you need to use marital assets to jointly pay off what you owe –but, usually that’s a worthwhile step, if it means you can begin your single life with a fresh start. Alternatively, some couples decide to divide and transfer their debts, so that each person is individually responsible only for his or her portion.

Either way, the goal is to separate your finances (and any remaining debt) from your husband’s finances (and any of his remaining debt).  As a result, you’ll remove your liability for what he owes.

If possible, you’ll also want to close joint credit cards and eliminate your husband as an authorized used on any credit cards in your name. Remember: Credit card companies and other third party agents are not bound by divorce agreements.  It may sound harsh, but if your names are both on a credit card account, the credit card company can hold you responsible if your ex rings up a balance and then decides not to pay.

One word of caution here:  New federal regulations are making it harder than ever for women with little or no income to establish credit on their own. You’ll need to proceed with caution as you set out to establish credit in your own name . . . Which brings up my third point . . .

  1. Protect your credit.Once you have: a) established control of your own debt and b) separated your liability from your husband’s debt, it’s time to turn the page and begin a new chapter. You’ll need to establish credit in your own name –and then, once that credit is established, you’ll need to work hard to protect it. Start slowly and proceed with caution, keeping a careful watch on credit card balances, debit and ATM cards, etc.

A good first step should be to create a budget that will allow you to maintain your lifestyle, pay off any remaining debt and increase your savings. A divorce financial planner can help you determine how to manage your assets and which adjustments are necessary for continued financial stability.

Free Consultation with Divorce Lawyer in Utah

If you have a question about divorce law or if you need to start or defend against a divorce case in Utah call Ascent Law at (801) 676-5506. We will fhelp you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Imputed Income for Child Support in Utah

West Jordan Lawyer

What is an Acceptable Use Policy?

Family Lawyer

Real Estate Lease

Getting Guardianship of your Aging Parent

from Michael Anderson http://www.ascentlawfirm.com/divorce-with-debts/

Advertisements

Getting Guardianship of Your Aging Parent

You should begin gathering documents right from the first moment you consider taking on the role of a guardian. Guardianship is necessarily a very document and detail-heavy endeavor, because you are taking legal responsibility for the welfare of another human being. Guardians work very closely with the courts in their county or state, and documents are crucial to create a record of the guardianship.

Getting Guardianship of Your Aging Parent

Preserving All Guardianship Documents

Whether you’re the guardian of an elderly relative, a child, or someone otherwise unable to make their own legal decisions, you are responsible for the management and safety of that person’s assets. As such, you need to gather every document relevant to the management of these assets. Think about your duties and which documents may contain information pertaining to each duty, such as:

  • Documents about medical care or treatment, particularly invoices and insurance information
  • Receipts reflecting the purchase of necessities such as food, clothes, cars, household items, and other personal items
  • Invoices showing educational costs
  • Investment and financial statements
  • Banking statements and check ledgers
  • Legal documents pertaining to your guardianship and to any lawsuits the ward may be party to
  • Wills, trusts, or any other documents regarding any inherited assets of the ward
  • Documents showing ownership and valuation of property held by the guardianship estate
  • Previous guardianship inventories, accountings, and appraisals prepared for the court

Utah Guardianship Laws

A legal guardian must follow the applicable guardianship laws of the state, which are typically found in the state’s probate code. You have many options for assistance. First, the National Guardianship Association is a good resource, especially if you and your intended ward reside in different states. If you reside in the same state, you can begin by contacting the local family court of your county and consulting with the court clerk. The clerk can provide you with some preliminary information and guide you to the appropriate court, depending upon the nature of your guardianship. For example, in California if you are the guardian of a minor you may be subject to both the rules of the Probate Court and the Juvenile Court.

Many states have created their own guardianship assistance division, such as New York’s Guardian Assistance Network, the Guardianship Association of New Jersey, and the Illinois Guardianship and Advocacy Commission. In Utah, guardian training is provided online and you must pass the Utah Guardian Pre-appointment Test before you can apply to be a guardian.  You should make sure you speak with a Guardianship lawyer or probate attorney to help you.

You can refer to the probate code of your state, but an attorney with experience in guardianships will be best able to assist you in clearly understanding your legal responsibilities and their proper execution.

Making a Checklist of Documents

You may find the checklist below helpful in creating your own personal document checklist.

_____Power of Attorney

_____Living Will

_____Guardianship Papers

_____Trust Documents

_____Deeds

_____Land Grants

_____Water Rights

_____Mortgages

_____Leases

_____Bonds

_____Loans

_____Contracts

_____Tax Notices

_____Abstracts of Title

_____Vehicle Titles

_____Bank Statements

_____Pass Books

_____Checkbook Registers

_____Mutual Fund Statements

_____IRA Statements

_____Stock Certificates

_____Canceled Checks

_____Bills

_____Receipts

_____Check Stubs

_____Social Security Documents

_____Retirement Papers

_____Pension Documents

_____Income Tax Returns

_____Will

 

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a legal matter, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Can Bankruptcy Help Creditors?

Divorce for Dads

Insolvency

Probate Lawyer

Imputed Income for Child Support in Utah

West Jordan Lawyer

from Michael Anderson http://www.ascentlawfirm.com/getting-guardianship-of-your-aging-parent/

West Jordan Lawyer

West Jordan Lawyer

Driverless cars, the pinnacle of automotive innovation and the potential future of safe driving, have recently proven to be anything but: according to a study from the University of Michigan’s Transportation Research Institute in Ann Arbor, auto accident rates are twice as high for driverless cars as they are for your average error-prone human driver.

With rates like that, any self-driving car owner can expect to pay a number of visits to her lawyer, if the car doesn’t crash itself along the way.

SHOULD DRIVERLESS CARS OBEY ALL TRAFFIC LAWS WITHOUT EXCEPTION?

What’s causing this auto accident discrepancy? After all, anyone would think human drivers in the kind of rush-hour traffic that backs up miles outside West Jordan, Utah would have a harder time navigating the highway than a cool, calculating robot.

The catch? Self-driving cars are programmed to obey all traffic laws, regardless of the situation. So whether it’s merging onto high-speed traffic on the highway or rolling into a four-way intersection in Farmington, a self-driving car makes no concessions.

Human drivers, meanwhile, bend the rules of traffic law with abandon. Most drivers are guilty of rolling through the occasional stop sign, speeding through that yellow light or driving “with the flow of traffic” on the highway—even if traffic’s running 15 over the speed limit.

Lawyer in Utah

As West Jordan Utah attorneys, we practice in several areas of law including divorce, real estate, bankruptcy, business law, child custody, child support, adoption law and other areas.

In the interest of preventing an auto accident and a subsequent trip to the local personal injury lawyer, should self-driving cars bend to the will of human error?

It’s a sticky situation, to be sure. If Google programs its cars to disobey traffic laws, the next question is: how much? If self-driving cars start deliberately breaking the law, the search engine giant will be sure to face an onslaught of government and lawyer inquiries.

In the meantime, Google is working to program its cars to be more “aggressive” while still adhering to all traffic laws. Driving is a complex social practice, whether you’re driving on the interstate or around the shops of downtown West Jordan.

For driverless cars, the game is still very much a human one, law breaking and all.

NEW BILL PASSES REMOVING ALL PROTECTIONS AGAINST CONTAMINATED WATER

In order to survive, it’s widely assumed that food, shelter, clothing and water are needed. Regardless of whether you’re currently taking up residence in West Jordan, Utah or another location in our beautiful home state, more than likely, the basic necessities of life aren’t hard to come by. That being said, even with fresh running water being made readily available to most Americans, water contamination still occurs.

For example, in the United States, coal is often burned to produce enough electricity to keep cities up and running. However, when such a practice takes place, ash is produced as waste. Said ash, unfortunately, can potentially makes its way as a toxic substance into precious municipal water sources, causing incidents of wrongful death to come about. In such a situation, a lawyer might very well be needed.

Recently, as a way of addressing such terrible happenings, the Federal Government inefficiently took action and passed a bill that eliminates many of the actual laws that regulate the containment and monitoring of coal ash. Furthermore, the approved bill also gives states the responsibility of overseeing the processes of coal ash maintenance and disposal. Even worse, the bill mentions nothing of how close coal ash containment locations can be to public water sources.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Imputed Income for Child Support in Utah

The law is clear that parents have an ongoing obligation to financially support their minor children. Although most parents have no problem with this duty of support, some parents resist what they consider to be excessive child support orders and may intentionally reduce income to lower their support payments.

Imputed Income for Child Support in Utah

The law has specific rules for situations where paying parents reduce their earnings without good cause. In Utah, the courts may add back into the child support calculation the income that the paying parent claims to have lost. This concept is known as “imputing income.”

This article addresses how Utah courts impute income when the paying parent is falsely lowering her or his earnings. If you have questions after reading this article, you should contact an experienced family law attorney in your area.

Establishing a Child Support Order

Utah law states specifically that children are entitled to share in the current incomes of both parents. State law uses a formula to determine how much child support should be paid by one parent to the other parent. For more detailed information about the child support law in Utah.

The Meaning of Imputed Income

If a judge rules that the parent who is responsible for paying child support (the paying parent) has intentionally lowered his or her earnings, the court can attribute additional income toward the paying parent in order to establish a fair child support order – one that will provide sufficient financial support to the child. This is called “imputing income.”

Courts won’t impute income when there is good cause for a reduction in support. However, when judges find that a parent has voluntarily reduced income, then the paying parent will likely be ordered to pay support based on his or her earning capacity.

Voluntary Unemployment

Some parents may think their child support payment is too high or feel that they should not have to pay any child support at all. They may try to find ways to avoid their obligation to their children. Some paying parents may decide to quit a job, refuse to find replacement work, and then ask the court to reduce their child support payment. In Utah, if a court determines that the paying parent lost a job deliberately, he or she will be considered voluntarily unemployed, and the judge will not reduce the child support order.

Voluntary Underemployment

The term “underemployment” means that the paying parent has intentionally taken a lower paying job or hides income to lessen the child support order. In other words, the paying parent is working below his or her full earning potential.

A paying parent may be underemployed when he or she is no longer working in an occupation for which she or he has been trained and is working at a lower paying job. For example, a registered nurse may decide to leave a lucrative hospital job and take a minimum wage job in a daycare. The court could rule that the nurse is underemployed and should be earning more money.

The paying parent doesn’t necessarily have to be deliberate in trying to lose or lower income. Utah law holds that if the paying parent’s loss of earnings is due to neglect, income can be imputed.

A court could also find a paying parent to be underemployed if the paying parent defers taking sales commissions or bonuses. For example, right before a scheduled child support hearing, the paying parent defers taking a year-end bonus by asking his or her employer to pay the bonus at a later time. The intention is to keep the bonus hidden, so it’s not used to calculate child support. If it’s proven that this was the paying parent’s ploy, the judge may impute or add the bonus back into the calculation.

How Courts Calculate Imputed Income

In child support cases, Utah law requires that both parents provide their most recent income tax returns and written proof of their current and past earnings. The judge has this information available for reference to see what the paying parent was earning in the past and base child support on that amount, rather than the artificially reduced amount of income.

When the paying parent has no significant work history or fails to provide his or her income history, the judge may refer to the most recently published Utah Occupational Employment Wage Survey. The judge will draw on this information to establish what the paying parent’s imputed income should be.

Utah law has special statutes that focus on business owners who may try to use the business to hide income. If the business owner is lending the business money to minimize his or her earnings, the loan interest should be at the going market rate. Otherwise, the loan amount could be counted as income for child support calculation purposes.

When Imputing Income is not Allowed

There are some cases where courts are prohibited from imputing income. If the paying parent becomes physically or mentally disabled or has had employment losses due to Hurricanes Katrina or Rita, the court cannot find that the paying parent is voluntarily unemployed or underemployed.

In addition if one parent is caring for the parties’ child who is under five years of age, the court will not attribute income to that parent.

Free Consultation with a Child Support Lawyer in Utah

If you have a question about child support or if you need to collect back child support, please call Ascent Law at (801) 676-5506. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Can Bankruptcy Help Creditors?

Yes. In some situations, not in all situations.

Can Bankruptcy Help Creditors

The appointment of a receiver over a borrower’s assets is a powerful tool for the secured creditor when included as a default provision in a well-crafted loan document. Pursuant to Utah law, a receiver “protects and preserves the property” serving as the creditor’s collateral. The law effectively gives the receiver control over the debtor’s property and allows the secured creditor, which sought the appointment, to obtain information regarding the day-to-day usage of its collateral and ensures that payment of net cash flow from the property will be paid to the lender.

Often the borrower will seek to regain control of its business by filing a Chapter 11 bankruptcy petition. The Bankruptcy Code sets forth certain duties and rights for the receiver as a custodian of the debtor’s property once the bankruptcy petition is filed. The Code also creates a procedure for the bankruptcy court to determine whether the receiver should turn over the property to the debtor or continue in “possession, custody or control of the property.”

WHEN A DEBTOR TURNS TO BANKRUPTCY, A SECURED CREDITOR CAN USE THE BANKRUPTCY CODE AND MAY GET RELIEF

The Bankruptcy Code makes it clear that once a receiver learns of the bankruptcy case, the receiver is obligated to stop administering the debtor’s property, except to the extent necessary to preserve that property.1Thus, once the bankruptcy petition is filed, the receiver generally has an affirmative duty to return control of the business to the defaulting debtor.

Despite this general requirement mandating the receiver turn over the property to the debtor, the secured creditor may file a motion to allow the receiver to maintain control over the property serving as its collateral. This motion is typically styled as a Motion for Excusal of Turnover by the Receiver.

After reviewing the Motion for Excusal of Turnover by the Receiver and, perhaps, taking evidence, the bankruptcy court will decide whether the interests of the creditors will be better served by leaving the receiver in possession and control of the debtor’s property. In addition, in the rare case in which the debtor is solvent, the bankruptcy court will consider whether the interests of the owners would be better served by permitting the receiver to remain in place.

Therefore, if the creditor is successful in getting a receiver appointed, but the borrower files bankruptcy and tries to regain control of the business and the collateral, the Bankruptcy Code provides a legal basis for the creditor to take prompt action in order to maintain the receiver’s control of the collateral. With this in mind, the Motion for Excusal of Turnover by the Receiver should be filed as quickly as possible after the bankruptcy petition is filed setting forth the reasons the creditors will be better served by the receiver’s continued possession and control of the debtor’s property serving as the collateral.

Our firm has been successful, recently, on several occasions in obtaining these orders protecting the rights and property of lenders in bankruptcy cases. These actions helped provide the lenders with a more positive outcome to the entire bankruptcy case.

Free Consultation with Bankruptcy Lawyer

If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have many years of experience in bankruptcy law. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Move Out of the Family House?

Move Out of the Family House

If you’re going through a divorce in Utah, you may be wondering whether you should move out of the family home before, or during, your divorce case. The answer is it depends. Generally speaking, if child custody, parenting time, or the division of property (including the family home) will be contested issues in the divorce proceeding, you might want to think twice before moving out.

Will Moving Out of the Family Home Impact my Divorce?

The reality is that legal “precedent” (meaning an example or a guide, which will be considered later by a judge) is set when one spouse moves out. If one spouse has already moved out, and the new living arrangements seem to be working fine, Judges may not want to disrupt the status quo. The spouse that stayed in the house with the kids may argue that another move would cause too much disruption for the children, so things should just stay as they are, with the spouse who already moved out, staying out.

These arguments don’t always carry the day, but judges will often consider them. If custody is an issue or you really want to keep the house, try to stay put until the “temporary relief hearing,” which is your first opportunity to get in front of a judge and explain why you should stay.

If you need to move out of the home immediately because of an abusive or otherwise unlivable situation for you, or the children, consider the following:

If you’re being abused, get help.

Domestic violence is a serious problem. If you, or your children, are being abused, you should get help immediately. Contact the local police department and/or an attorney that can advise you of your rights. Most police departments have units dedicated to assisting victims of abuse, and domestic violence charges often have a major impact on divorce cases. You should be fully informed on how to protect yourself and your children.

If custody is an issue, be careful.

If you move out and leave the children with your spouse, you’re implying (by your actions) that the other parent can provide a safe home for your children.

If you want to take the children with you, but your spouse won’t agree to it, you must go to court and get permission from a judge before you do so, or you may be charged with kidnapping.

If you do move out without the kids, make sure that you continue to spend significant amounts of time with them so you don’t risk limiting your parenting time later. If you fail to keep continuing contact with your children, your spouse may try to argue that you abandoned the children and therefore, lost the right to spend time with them.

If you take any property with you, be sure to inventory it.

Take videos or still photos of everything you take with you. It’s fine to take your own personal property, clothing, and jewelry, but be careful about taking jointly-owned property, or anything that will disrupt the household, such as appliances, electronics, or furniture.

If you leave without much, make an inventory of everything in the house before you go. In addition to photos and/or videos, create a list of items, with their locations and your best estimate of current values.

Later on, if you and your spouse get into a dispute about marital property, your photos and lists may serve as evidence of what existed at the time of separation. Organizing the information about your property in this manner can also help make the division easier.

Finally, you may want to let your spouse know about your inventory of property. This should discourage your spouse from “misplacing” any important items.

Free Consultation with a Divorce Lawyer in Utah

If you have a question about divorce law or if you need to start or defend against a divorce case in Utah call Ascent Law at (801) 676-5506. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Fraudulent Conveyance Explained

We spend a lot of time thinking about and writing about fraudulent conveyances here.  That’s because a fraudulent conveyance can totally defeat an asset protection plan, no matter how good your asset protection attorney may be.  Laws regarding fraudulent conveyances make certain types of transfers wrongful.  One type of transfer that is prohibited is a transfer made within a certain period of time before a claim is made or while a claim is pending.  What is a claim?  Claims take many forms.  Claims can be lawsuits, demand letters, or even accidents where an injured person has yet to contact the person at fault.

Fraudulent Conveyance Explained

Let’s look at an example.  Consider an oral surgeon or dentist (“doctor”) who is not properly insured and accidentally causes injury to a patient during a surgical procedure.  If the patient sues the doctor, then the doctor’s personal assets are at risk.  The doctor’s personal assets include cash, stocks, bonds, investment properties, and in some cases even items like cars, boats and airplanes.

What we’ve established so far is that a doctor with assets has caused an injury.  Assume that no lawsuit has been filed.  Even though there is not a lawsuit pending, there is a “claim” against the doctor.  The doctor knows that she or he could end up owing money to the patient, and that is enough.  What can the doctor do to protected assets?

The answer is complex.  While the doctor can continue to move money and assets around, if the doctor moves assets to a place where they cannot be reached by the injured patient, then a court can “set aside” those transfers of assets.  The bottom line is that a court can require transferred assets to be given to the injured patient, even if the doctor is no longer legally and technically the owner of the assets.

In other words, once a claim exists, it is too late to protect most assets.  While one can continue moving assets while a claim is pending, it is almost impossible for an asset protection attorney to develop a plan that would make assets immune, at that point.  The moral of the story is that people with assets who are engaged in professional practices (e.g. doctors, dentists, lawyers, real estate developers, etc.) need to engage an asset protection attorney before claims arise.  That is the only way that a plan providing true asset protection can be developed and tailored to meet the needs of specific individuals.

It is true that some assets, in some states, are exempt assets and automatically protected.  But if you are a person with assets that go beyond exempt assets, then you should consider proactively pursuing an asset protection strategy.

What is Funding?

  • Primary and Second Homes (non-rentals)

The first asset you need to consider is your primary residence.  If you live in a state with fantastic homestead protection like Utah, then you don’t need to do anything.  Your home is protected.  Otherwise, you need to provide some protection for your home.  The typical way to do that is to transfer or “deed” your primary residence into your asset protection trust.  The same is true of any second homes that you own but don’t use to generate rental income.

  • Rental Properties

Rental properties are slightly riskier than non-rental properties.  As a result, there needs to be some additional insulation around them in order to protect your other assets.  That additional insulation comes in the form of a limited liability company (a “LLC”).  The funding works as follows:

  1. The LLC is created, and it is owned in the exact same proportions as the rental property to be transferred.
  2. The rental property is deeded into the LLC.
  3. The LLC is transferred into your asset protection limited partnership.

It’s very important that you follow the exact sequence described above, because in some instances it can save you money by avoiding transfer taxes and/or a reassessment for tax purposes (check with your local taxing authority and clerk of court to make sure).

  • Safe Assets

Cash, stocks, bonds, precious metals, and jewelry are all considered “safe assets.”  That’s because they can’t generate liabilities for you.  Think about it like this: Someone can get injured on your rental property.  That’s just not true of your safe assets.  Because of this unique feature, your safe assets can be owned directly by your limited partnership, without the need to insulate those assets with an LLC.

  • Vehicles

Vehicles are very risky assets.  As a result, they should be left outside your plan completely.  Own vehicles in your personal name, and trust that your other assets are safely protected.

Free Consultation with a Lawyer in Utah

If you have a bankruptcy question, or need help with Asset Protection, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed thousands of cases. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Protect Your Business in Divorce

Get this – 52 percent of all first marriages and 70 percent of second and third marriages end in divorce. Although divorces are always difficult for everyone involved, they can become that much more arduous when one or both spouses own a business.

Your business is probably the most valuable financial asset you own. You’ve spent countless hours and resources nurturing and growing it. But did you know that you might be unwittingly doing things that could put your business at risk in the event of a future divorce?

Protect Your Business in Divorce

Depending on your individual circumstances, your spouse may be entitled to as much as 50 percent of your business in a divorce. Since it’s probably safe to assume that you will not want your ex-spouse to remain in your life as a business partner, what can you do to protect your business?

This article will first explain the basic differences between separate and marital property and then provide you with a number of effective tools that could help protect your business against the possibility of a divorce. We will also discuss several ways to mitigate the damage if you are already heading for divorce.

Before we begin, please keep in mind the following critical piece of advice:

In order to be effective, these protective methods must be in place well before the thought of divorce enters anyone’s mind. Obviously, something like a prenuptial agreement needs to be signed before the wedding (and please not the night before), but techniques such as transfers to an irrevocable trust need to be done years in advance. Depending on your state’s fraudulent transfer laws, transactions can be voided up to seven years after the transfer. If you and/or your spouse are even slightly thinking about divorce, it’s probably too late to take any protective measures.

OK, so let’s begin with the basic differences between separate and marital property.

How to Protect Your Business in a Divorce: Separate vs. Marital Property

Although there are differences from state to state, in general, separate property includes:

  • Property that was owned prior to the marriage
  • An inheritance received by one spouse solely
  • A gift received by one spouse solely from a third party (not from the other spouse)
  • The pain and suffering portion of a personal injury judgment

Warning: Separate property can lose its that status if it is mixed or commingled with marital property or vice versa. For example, if you re-title your separately owned condo by adding your spouse as a co-owner or if you deposit the inheritance from your parents into a joint bank account with your spouse, then that property will most likely now be considered marital property.

All other property that is acquired during the marriage is considered marital property regardless of which spouse owns the property or how it is titled.

Marital property consists of all income and assets acquired by either spouse during the marriage including, but not limited to: Pension plans; 401(k)s, IRAs and other retirement plans; deferred compensation; stock options; restricted stocks and other equity; bonuses; commissions; country club memberships; annuities; life insurance (especially those with cash values); brokerage accounts – mutual funds, stocks, bonds, etc; bank accounts – checking, savings, CDs, etc; closely-held businesses; professional practices and licenses; real estate; limited partnerships; cars, boats, etc; art, antiques; tax refunds.

In many jurisdictions, if your separately owned property increases in value during the marriage, that increase is also considered marital property.

It is also very important for you to know if you reside in a Community Property State or an Equitable Division State. There are nine Community Property States: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. These states consider both spouses as equal owners of all marital property (a 50-50 split is the rule). The remaining 41 states are Equitable-Distribution States, which consider factors such as the length of marriage and the spouse’s earning power and involvement in building the business when determining a settlement. Settlements in Equitable Distribution States do not need to be equal, but they should be fair (equitable).

You should fully understand this very important distinction between separate and marital property so that you do not inadvertently do anything that might cause your separate property to be construed as marital property.

How to Protect Your Business in a Divorce: Prenuptial and Postnuptial Agreements

So what is a prenuptial agreement? A prenuptial agreement (prenup) is a contract signed by both parties before their wedding that details what their property rights and expectations (including alimony) would be upon divorce. A well-drafted prenup can “override” both Community Property and Equitable Distribution State laws and the courts will usually respect such agreements, making them a very powerful tool in protecting your business.

Having said that, prenups can be rather tricky, so it is really important that they are well drafted. To strengthen them, each to-be spouse should be represented by their own attorney. In most jurisdictions prenups should contain the following vital elements:

  • The agreement must be in writing (No oral prenups)
  • It must be executed voluntarily and without coercion (having your fiancé sign a prenup the day before the wedding is a good way to invalidate that prenup)
  • There must be full disclosure (no hiding of assets) – this is another way to invalidate a prenup
  • The agreement cannot be unconscionable (this is also another way to invalidate a prenup). For example, if you’re making millions, don’t expect to get away with only giving up the silverware in the divorce, even if that’s what’s in the prenup.
  • It must be  executed by both parties, preferably in front of witnesses (or a notary)

Some attorneys even recommend having a judge witness the signing to make sure that no party was coerced.

By using a prenuptial agreement, the parties can decide in advanced what property will be considered separate property and what property will be considered marital property and how that marital property should be divided.

A prenup is probably one of the best and least expensive ways of protecting your business against a future divorce.

But if you don’t get a prenup put in place, a postnuptial agreement may be an option. It is similar to a prenuptial agreement except that it is, as the name implies, entered into and signed after marriage. In order to be valid, a postnup should contain the same vital elements as a prenup.

Having said that, a number of states still don’t recognized postnups and even when they do, postnups are challenged and invalidated much more frequently than prenups.

Here’s why: Before marriage, the parties are entering into an agreement much like two business people entering into a contract and neither party has any legal family law rights on the other. Theoretically, if they don’t like the contract, either party can walk away. However after marriage, the situation is very different. The married couple now have very well defined legal rights regarding support and property division and they are considered to be in a fiduciary relationship with each other, meaning each party has to act in the best interests of the other party. Therefore, any transactions between them will be viewed with caution by the courts. By negotiating a postnuptial agreement, one party will typically be giving up some of these rights and that’s why postnups will usually be held to a higher standard of fairness than prenups (on the theory that individuals have less bargaining power once married).

Nevertheless, if you don’t have a prenup, try to get a postnup. It’s better than nothing. Just understand that a postnup is not nearly as ironclad as a prenup and you never know how the courts will act if one spouse decides not to abide by the terms of the postnup.

How to Protect Your Business in a Divorce: Using a Partnership, Shareholder, LLC and/or Buy-Sell Agreements to “Lock-out” Your Spouse.

Partnership, shareholder and/or operating agreements should include various provisions that would protect the interests of the other owners if one of the owners gets divorced, including:

  • A requirement that unmarried shareholders provide the company with a prenup agreement prior to marriage along with a waiver by the owner’s spouse-to-be of his or her future interest in the business.
  • A prohibition against the transfer of shares without the approval of the other partners or shareholders and the right, but not the obligation, of the partners or shareholders to purchase the shares or interest of one or both of the divorcing parties so that the other owners can maintain their control of the business.

How to Protect Your Business in a Divorce: Pay Yourself a Competitive Salary

This point is often overlooked. If you don’t pay yourself a competitive salary and instead reinvest everything back into the business, your soon to be ex-spouse might claim that he or she is entitled to more money or a larger percentage of your business because he or she did not derive any benefit and all your money went back into the business instead of the household.

How to Protect Your Business in a Divorce: Think Twice About Involving Your Spouse in Your Business

As we discussed earlier, all or part of your business will probably be considered marital property. If your spouse was employed by you or your company, helped run the company in any way or even contributed business ideas during your marriage, then he or she may be entitled to a substantial percentage of your business. The more involved in your business your spouse was, the bigger that percentage would be. If you have partners in your business, then your spouse would own a percentage of your share.

How to Protect Your Business in a Divorce: How to “Pay-off” Your Spouse

If for whatever reason you were not able to adequately protect your business and now your spouse is entitled to an ownership interest, here are some ways to pay him or her off (I’m assuming your don’t want to be business partners after the divorce):

  • Use your share of other marital assets including cash, stocks, real estate, retirement funds, etc.
  • Property Settlement Note – this is a long-term payout (with interest) of the amount you owe your ex-spouse for the value of her share of the business.
  • Sell the business and divide the sales price. This is obviously the least preferred method, but all too common. When the business represents the vast majority of all assets, there just may be no other way to pay-off the other spouse. 

Free Consultation with Divorce and Business Lawyer in Utah

If you have a question about divorce law or if you need to start or defend against a divorce case in Utah call Ascent Law at (801) 676-5506. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Stages in Divorce Mediation

Most mediations go through a series of five stages—not necessarily in this order, and some of them may be repeated at various points during a divorce mediation. Your own mediation may be different, but here are the basics of each stage.

Introductory Stage

In this first stage, the mediator works with you and your spouse to lay a foundation for the rest of the mediation. You give the mediator background information about your situation, and the mediator explains how the mediation will be conducted. Depending on how well you and your spouse communicate and what the issues are in your case, the mediator suggests an approach that should optimize the chances of reaching an agreement. You’ll assess the issues on which you and your spouse agree or disagree, helping you to work together on an agenda for the rest of the mediation.

Stages in Divorce Mediation

Information-Gathering Stage

In order for the mediation to be successful, you, your spouse, and the mediator all need to be as fully informed as possible about the facts of your case. This is the information gathering stage. Sometimes it begins during the first session; sometimes it starts after that session. If information that you and the mediator need is unavailable or in dispute, the mediator will try to help you find ways to get it or to determine what is correct. For example, you might need the policy number and other details of a life insurance policy. If you can’t locate your copy of the policy, the mediator might suggest ways to get this information, such as contacting the broker who sold you the policy or writing to the insurance company.

During this stage, the mediator may first begin to discuss the general legal rules that might apply to your case. This can include the laws of your state dictating how a judge would divide your assets and debts, how child custody and child support would be decided, when and how alimony can be ordered, and laws dealing with related issues like taxes and life and health insurance. This general legal information will help you decide how to approach the issues in your case.

The mediator will also ask you and your spouse to bring in financial documents such as tax returns and bank and mortgage statements. As you progress, the mediator will summarize the information being assembled. If you agree that additional research is needed or a neutral expert is to be consulted, that will go on a “to do” list. This second stage of the mediation can span two or more sessions, especially if you need to do outside work to obtain additional information or appraisals. If you feel that you already know enough about your situation and have definite ideas on how to work out a settlement, you may find yourself impatient with this stage and anxious to move ahead with the negotiations. Even though you may want to rush on, the mediator’s job is to make sure that both you and your spouse have all the facts and information you need to negotiate an agreement that is legally binding and that you won’t regret having signed.

Framing Stage

In the framing stage, the mediator helps each spouse outline that person’s reasons for wanting certain outcomes in the settlement. These reasons consist of individual concerns, priorities, goals, and values. They are often referred to by mediators as “needs and interests.” Here, we use the broader term “interests.” Identifying interests helps to frame the core goal of the mediation: finding a resolution of the issues that successfully addresses each spouse’s most important interests. In most divorces, many issues need to be examined in light of each spouse’s interest. These include property and debt division, child custody, child support, and alimony.

Often, spouses’ interests will overlap. This is especially likely if the interests involve a concern for other people, such as children. When an overlap like this occurs, it increases the likelihood of finding settlement options that address their common concerns. Of course, it’s not always possible to negotiate an agreement that satisfies fully all of the interests of the disputing parties. Some interests may have to be compromised, especially in divorce, where limited resources must be divided between two households. But if the focus is on identifying and addressing each person’s most important needs and interests, the resulting compromises will be ones that both spouses can live with.

Some mediators prefer to conduct the framing stage in separate sessions, as they believe it better prepares each of you for the next stage: negotiating. Other mediators favor joint sessions because they believe that hearing your spouse work with the mediator to formulate interests lays a better foundation for the give and take of the negotiation stage. Either way can work, although separate sessions make the mediation cost a little more and take a little longer, because anything important that is said in the separate session will have to be repeated to the other spouse.

Negotiating Stage

Once the mediator has helped the spouses frame the issues and interests clearly, it is time to negotiate an acceptable settlement. This usually begins with an exploration of possible options. With the mediator’s help, the spouses discuss and evaluate the options, until eventually they narrow down the options to the ones that work best for both spouses. Getting to the final combination of options will involve compromises and concessions on both sides

Most mediators will emphasize the problem-solving aspect of negotiation at this stage. The problem to be solved is finding settlement options that address each spouse’s most important interests as fully as possible. With this focus, you’ll be able to negotiate by trading off acceptable options instead of getting locked into zero-sum bargaining, where one spouse’s gain is the other spouse’s loss.

Concluding Stage

In this stage, the tentative settlement agreement is put into writing and circulated to both spouses for review with their advisers. If the issues in your case are simple, the mediator may prepare a memorandum outlining your settlement and give you an opportunity to sign it before you leave the mediation session in which you finished up your negotiating. The memorandum can summarize the essential points of agreement and can be used as a basis for preparing a formal settlement agreement that will be filed with the court as part of the now-uncontested divorce case.

Many mediators, especially those who are also lawyers, will prepare the written settlement agreement that will be filed with the court. However, you should also have a lawyer of your own look over the draft agreement on your behalf.

Free Consultation with Divorce Lawyer in Utah

If you have a question about divorce law or if you need to start or defend against a divorce case in Utah call Ascent Law at (801) 676-5506. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Asset Protection or Bankruptcy

Asset protection planning is closely related to financial planning.  Both asset protection and wealth preservation strategies are about managing risk, which requires careful planning and appropriate asset allocations.

Asset Protection or Bankruptcy

Asset Protection Works like Premium Insurance

In the insurance industry, underwriters charge fees (“premiums”) to undertake risks.  Individuals and businesses pay those premiums in order to limit their exposure to financial losses.  In other words, premiums represent known, fixed costs that are paid in exchange for a release from future liabilities, the extent of which are unknown.  Traditionally, asset protection has worked in a similar way.  The transaction fees required to set up wealth preservation strategies and asset protection plans are fixed, up-front costs similar to insurance premiums.

In the aggregate, people are more likely to lose money due to poor financial planning–a lack of proper asset allocation, biased advisors, and a bad economy or poor investment choices–than they are to lose money in a lawsuit.  But each individual situation is unique, and some people are in riskier, more lawsuit prone businesses than others.  In the case of high net worth individuals with significant exposure to risk (e.g. physicians like OBGYNs), certain wealth preservation strategies (in addition to insurance) absolutely must be pursued.

Wealth Preservation Through Asset Management

The least expensive form of wealth preservation comes from shifting at-risk assets to exempt assets.  The only cost from such a reallocation of assets (other than transaction fees) is a possible reduction in liquidity.  As an example, one could sell a certain portion of their stock or bond portfolio and purchase a cash-value life insurance policy.  While stocks and bonds are highly vulnerable in a lawsuit by creditors, the cash value of life insurance is protected from the claims of creditors in many states.  The practice of economics is the shifting of assets from areas of low yield to areas of high yield.  Thus, if one can achieve her or his required rate of return via one of two investment vehicles, it makes economic sense to choose the less risky vehicle–the vehicle with less exposure to a suit by creditors.

Preservation of Assets

Where the goal is preservation of assets, timing is another consideration.  The structure of any asset protection plan should match the investments made within the plan.  It would make little sense to implement a wealth preservation strategy intended to last 30 years only to lose the principal in risky, short-term investments.  In the very near future, however, it may be possible to earn growth portfolio type gains while only taking wealth preservation risks.

Why Bankruptcy Doesn’t Always Work

If I lose my case, I’ll just file for bankruptcy.” We hear that statement often from scared doctors, dentists, orthodontists and other professionals, trying to fool themselves out of needing asset protection. Most of these doctors, unfortunately, don’t understand U.S. and state bankruptcy laws. Most believe that if a huge lawsuit comes their way, they can simply declare bankruptcy, have the judgment forgotten and continue their normal life.

Besides the damage to one’s credit and the rebuilding process that would ensue over the next seven years, there are many consequences originating from federal and state bankruptcy rules that govern a person’s lifestyle. For example, federal bankruptcy rules state that a married couple can have $34,850 in home equity after bankruptcy. Chances are, as a successful medical professional, you have more equity in your home than that. Be prepared to sell the house, give the profits to your debtors and move into an apartment. It may be easy to declare bankruptcy and avoid paying off a lawsuit debt, but we guarantee that it will be difficult having to change the lifestyle your family has become accustomed to.

The bankruptcy exemption rules are very specific about business “tools of the trade”. A successful doctor may have a thriving practice with a state-of-the-art office. But if that doctor declares bankruptcy, all the “tools of the trade” will be sold off to debtors except for $1,750 according to Federal laws. What type of doctor’s office can be run with just $1,750 in equipment?

Each state has their own bankruptcy exemptions and these take the place of federal exemptions where applicable. Lucky doctors in Utah get to keep their home after declaring bankruptcy no matter what the value.

Utah Bankruptcy exemptions and generally, Utah is very lenient compared to most states. For most successful professionals, declaring bankruptcy will drastically alter their lives.

After learning of these rules, most of our clients come to the understanding that it will be better for the happiness of their family to utilize asset protection to protect wealth instead of giving it up through bankruptcy. Before considering bankruptcy as an option, please consult with an attorney specialist in your state.

Free Consultation with a Lawyer in Utah

If you have a bankruptcy question, or need help with asset protection in Utah, call Ascent Law now at (801) 676-5506. Attorneys in our office have worked on thousands of cases. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

from Michael Anderson http://www.ascentlawfirm.com/asset-protection-or-bankruptcy/