Asset Protection Using Separate Property Ownership

Wife was worried about the debt incurred by husband and by the financial risks involved in husband’s business. Husband and wife entered into a post-nuptial agreement in 1991. At the same time, clients created separate revocable trusts and divided their assets between the trusts in accordance with the post-nuptial agreement. Wife was a full-time homemaker with no income. Husband paid the mortgage and expenses on the home owned by the wife’s trust. Husband continually added to the savings account owned by the wife’s trust. In 2001, husband encountered financial difficulties that resulted in a personal bankruptcy and a non-dischargeable debt to the IRS. The assets owned by the wife’s trust were not included or jeopardized by the husband’s bankruptcy, by the IRS, or by the creditors of the husband.