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jeffswaves
11-17-2009, 12:39 AM
Hey Guys-

This is my first post. Looks like a good group. I was wondering if anyone knows if there is such a thing as financial protection for a spouse. I am not even engaged yet, but I might be in the next several months. I currently have a business and while I am fairly risky about "going for it" in the business world, my gf is very risk-adverse. Is there anything I need to know where I can put the company(s) in a shell account in my name or other format that would only keep my neck on the financial chopping block and not hers? In other words, my credit would be at risk and hers is not even if we get married? I have a S Corporation. Thanks in advance!

BTW, I know that being married is "for richer or poorer", but my risks might stress her out...

Business Attorney
11-17-2009, 01:50 AM
There are lots of things that you can do to minimize one spouse's exposure to another spouse's business or professional liabilities. Having created a corporation, you have already done one of the most important things by limiting your own exposure.

Some other ideas: Keep her assets separate from yours, set up retirement plans (ability of creditors to get retirement assets is limited in many states), don't ever let a lender convince you that your wife should sign a personal guarantee.

State laws governing creditors rights vary. In some states, there is a significant homestead exemption that protects your home from creditors (other than your mortgage lenders). In those states, putting money into your house can be a smart move. In other states, the homestead exemption is relatively small and offers little protection. Another tack (which also varies from state to state) is how you take title to your home. Illinois, for example, has a form of legal title known as tenancy by the entirety which offers greater protection to a spouse. Another alternative is to simply have only your wife's name on the title. Of course, that can cause other complexities if there is ever a divorce (and no pre-nup).

There are other asset protection ideas that protect not only your spouse's assets but your other assets as well. Whether those would work for you would require meeting with a knowledgeable advisor who can explain the advantages, disadvantages, costs and limitations.

Evan
11-17-2009, 09:25 PM
I think David's advice is certainly head-on. Again, you minimize the exposure by keeping as many things seperate as you can. This can seem like a disadvantage, but if you aren't joint signers on a checking account (for example), it is certainly easy to see that there is a degree of separation. This should also go for credit cards as well, as you may have a business credit card (in which you have a personal guarantee on it). If you opened a joint one with her, now there are two personal guarantee's, and a potential way to latch on.

I certainly won't go as far as saying you need to file "Married Filing Separately" as that may be taking it a bit too far.

As your issues are primarily legal, and not tax, you should speak to an attorney before you get married. A pre-nup may be needed, and they will know the specifics of your state (with things such as the homestead exemption).

I'm not sure what kind of business you operate, but it is probably also wise to make sure you have adequate insurance coverage to protect you and to minimize any potential loss. If your business has changed a bit over time and you haven't spoken to your insurance agent recently -- now may be a good time to have a "check up" to make sure that something new hasn't come up which isn't covered by your current policy.

jeffswaves
11-17-2009, 11:46 PM
Hey Guys-

Thanks so much for the replys. Good to know there are steps that can be taken in this type of situation. When the time comes, I will probably spring for an attorney. I look forward to interacting more on this forum. Thanks again, -Jeff