Is Using Secret Trusts and LLCs to Hide Marital Assets Legal?
Posted on October 03,2024 in Marital Property
A recent article in the Wall Street Journal may be causing concern for some spouses. The article discusses a super-wealthy couple going through a divorce. The wife - intending to remain in the couple’s 50,000-square-foot property during the divorce - was shocked to find that the house and virtually all of the couple’s assets were part of a network of secret trusts and LLCs. Since the wife was not listed as a beneficiary of the trust the house was in, she was not entitled to live there, and the property was not a part of the marital estate.
During the divorce, the husband went on a high-end shopping spree, buying up millions of dollars of real estate that he then placed in LLCs – out of the reach of his wife. He also bought million-dollar homes to "gift" to his adult son. This situation reflects a growing trend in which those with financial means use secret trusts, prenuptial agreements, gift strategies, and LLCs to shield high-end real estate in the event of a divorce.
But are these strategies legal? Could spouses who believe they are entitled to half of the marital assets be shocked to find out that those "assets" are owned by trusts and LLCs? If you are going through a financially complex divorce, you need a Wheaton, IL divorce attorney from Andrew Cores Family Law Group who will work hard to ensure you receive an equitable share of your marital assets.
Is Using a Secret Trust to Stash Marital Assets Legal?
Trusts can be used to transfer wealth without actually conveying title to a specific beneficiary. During a divorce, the existence of trusts can create issues for equitable distribution purposes. In other words, one spouse may be using trusts to hide marital assets. If the other spouse has no idea these trusts exist, he or she is unlikely to instigate an investigation, known as asset tracing. Asset tracing can be tedious and time-consuming but can help a spouse get a clear picture of when and how marital assets were hidden. If the trusts can be located and if it can be shown that a trust was established to intentionally conceal marital assets, it is unlikely to hold up in court.
When Does Using an LLC Become Hiding Marital Assets?
A Limited Liability Company (LLC) is a business structure that offers partnership flexibility with personal liability protection for LLC owners in the event of legal issues or business debt. These protections do not necessarily extend to divorce situations. If an LLC was formed during the marriage, or if marital funds were used to establish or grow the business, it will likely be considered marital property under Illinois equitable distribution laws. If an LLC was established prior to the marriage and has used no marital assets for growth or operation, it could be considered separate property.
Can One Spouse Gift Assets or Money During a Divorce?
Gifting marital assets to family and friends before or during divorce proceedings is a common method of hiding assets so they will not be subject to the division of assets during a divorce. While meant to look like a gift, the intent is for the receiver of the gift to hold on to the asset until the finalization of the divorce, then return the asset to the spouse who "gave" it to him or her. If you suspect your spouse might engage in gifting marital assets to friends or family members, tell your lawyer. Getting an injunction on gift-giving while the divorce is ongoing is possible.
Contact a DuPage County, IL High Net Worth Divorce Attorney
Hidden trusts, LLCs, and gifting before or during a divorce must be dealt with. If you believe your spouse is creatively hiding assets, hiring a forensic accountant to trace assets is well worth it. When you have a Wheaton, IL divorce with complex asset lawyer by your side from start to finish, you can rest easy, knowing you will get your fair share of the marital assets. The right lawyer will provide invaluable advice while skillfully advancing your interests. Contact the Andrew Cores Family Law Group at 630-871-1002 to schedule a free consultation.
