Can multi-generational wealth be protected in a Connecticut divorce?

Attorneys help clients preserve family assets

Those who are fortunate enough to confer or receive multi-generational wealth should be cognizant of the ways that a legacy such as this can be threatened. One way that assets might leave the family is through a divorce. However, there are ways to guard against the dissipation of multi-generational wealth when a marriage ends. Whether you’re looking to endow future generations or preserve what’s been given to you, the experienced Connecticut attorneys at Needle | Cuda in Westport offer counsel on preserving your family’s legacy.

What is multi-generational wealth?

Some individuals and families have accumulated sufficient wealth that they are able to transfer assets for the benefit of their descendants. However, Connecticut laws holds that most property acquired by someone while they are married becomes part of the marital estate that is divided between spouses when they divorce (see Equitable Distribution). This means that a loved one who fully intended to keep valuable assets in the family could have their wishes thwarted if one of their descendants ends their marriage without shielding what they received from marital property division.

How “marital” and “separate” property are treated in Connecticut?

Under Connecticut law, property owned before marriage by either spouse individually reverts back to that spouse upon divorce rather than becoming part of the divisible marital estate (a.k.a. “separate property”). Inheritances and gifts received by one spouse after a couple is wed can also qualify as separate property, but questions regarding the classification of specific assets can present unexpected complications. Assets that were originally owned separately often become co-mingled during years of marriage. Though a family home or business might be owned by one party prior to the marriage, their spouse can establish a stake in the asset by contributing to the maintenance of the house or working on behalf of the business.

Protecting wealth with premarital and postnuptial agreements?

Anyone who is concerned about asset protection in the event of a divorce should consider a prenuptial agreement. These legal instruments safeguard family wealth by declaring exactly what is a separate asset and should remain as such. Postnuptial agreements are also allowed in Connecticut as long as the terms of the document are fair. You might wish to negotiate this type of agreement if you receive substantial assets, such as a controlling share of the family business, while you are married.

How to use trusts and family foundations to keep multi-generational assets?

With careful planning, families can manage assets so that they do not become part of the marital estate. Depositing funds in a trust where a family member is a beneficiary means that those funds are not owned by that family member and are not subject to equitable distribution in a divorce. Changes over the past few years in Connecticut law have strengthened families’ ability to pass wealth from generation to generation, even over several centuries. Dynasty trusts are irrevocable trusts that some high-net-worth families use to reduce estate tax liability and preserve funds for the use of future generations. Private family foundations can be used to set aside assets for charitable purposes, shielding them from divorcing spouses.

Retaining control of a family business after a divorce

Unless alternative arrangements are made, a family business that one spouse takes over during the course of marriage becomes divisible marital property. While the business-owning spouse might retain the company in a divorce, it likely would be offset by other assets that go to their husband or wife. If you presently own a business and want to keep it with your family members rather than have it be included within a property division order, you might wish to create a trust that includes you and other relatives as beneficiaries. You should also aim to keep business proceeds separate from shared marital assets and opt against having your spouse do any work for the business.

Limiting the impact of alimony and child support obligations

In some situations, a family’s income-producing properties or other assets might be in one family member’s name, even though everyone shares the value. This can lead to unfair decisions on child support, alimony and property division if the spouse possesses sole title. If you risk exposure in this way, it is wise to explore revising title to these properties and seeking advice from your lawyer about deductions and other methods to obtain a result that more accurately reflects your circumstances. When you have substantial wealth and a complex financial portfolio, it is more difficult for a judge to gain a complete grasp of the relevant information. Accordingly, it is essential to hire a skillful attorney familiar with high-net-worth divorces. You should also focus on reaching consensus through settlement negotiations or mediations so your financial well-being is not in the hands of a judge.

Contact a Connecticut divorce lawyer for advice on protecting your family’s wealth

Needle | Cuda counsels Connecticut clients on the best ways to safeguard multigenerational wealth in the event that they get divorced. To schedule a consultation at our Westport office to discuss your options, please call 203-557-9500 or contact us online.