What about titling marital assets to my spouse who has less liability exposure?

Having a less liability-prone spouse own all the marital assets has fewerdrawbacks. And sometimes it is sensible to title the family assets to the less vulnerable spouse. But this too raises problems. You may title your million dollar home or other assets to your spouse for protection on the belief that your spouse won't get sued, but how do you really know this? This arrangement also has estate planning disadvantages. When marital assets are titled to both spouses, the spouses can more advantageously plan their estates because each can use credit shelter trusts to maximize their death tax credits. When the assets are titled to only one spouse, only that spouse can claim his or her estate tax exemption. The remainder of your spouse's estate will be taxed. This can cost your heirs a considerable estate tax. Assets titled to only one spouse forces a lopsided estate plan, and you lose tax planning options.

Nor are assets titled to one spouse necessarily safe from the debtor spouse's creditors. Even if the liability arose after the debtor's assets were titled to the 'safe' spouse, a creditor might successfully argue that the debtor-spouse has an equitable or beneficial interest in at least part of the property under a constructive or resulting trust theory; namely, that the spouse holding title is a trustee for the debtor-spouse. This argument is particularly likely to succeed when the debtor-spouse's funds purchased the property or paid the mortgage, maintenance or property upkeep. When the money invested in the asset came from the debtor-spouse, the property is not truly the property of the other spouse. If a debtor-spouse's assets are traceable to property, the defendant's spouse's creditors can claim that property. You don't want to gamble on further litigation over these sloppy issues. The best plan is free of these possible challenges. Only in a few cases do we suggest titling all the marital assets to one spouse.