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Asset protection: divorce or no divorce, owners have options

It's a common enough scenario. A wealthy man and his wife are going through divorce proceedings. The couple has children, and the husband is interested in passing on considerable wealth to them while minimizing the amount he divides with his wife.

Having that interest, however, does not mean that it is easily achieved. After all, property division generally involves sharing up to half of the property or assets acquired during the marriage. The fact that a divorce is a high-asset divorce does not change this.

That is why people in Illinois and across the nation sometimes use pre-nuptial agreements to alter that basic point of departure. But, as we will discuss in this post, there are certainly other asset-protection tools besides pre-nups.

One potentially useful tool, in particular, is a type of trust called an offshore asset protection trust.

This type of trust requires the account holder to file with the IRS the so-called FBAR form for foreign accounts valued at more than $10,000. FBAR stands for Report of Foreign Bank and Financial Accounts.

But when a trust of this type is set up properly, it can potentially be used to provide money for the education of children or grandchildren. It could also be created to be used for their health care costs.

For business owners, there are also ways to possibly structure their companies so that some of the assets of the company are transferred to the offshore trust.

In short, there are various ways that asset holders can consider trying to protect those assets for the next generation, even if their marriages dissolve.

Source: The Wall Street Journal, "Protecting Assets in a Messy Divorce," V.L. Hartmann, Oct. 2, 2013

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