[AZ] How can I structure a hard money loan to protect my funds and clarify marital contributions in case of divorce?

AZ Business

Lawyer, Esquire

25 satisfied customers

View context

Solved

To ensure that the loan remains separate from marital assets, it's important to clearly document that the funds are your separate property. You do that by ensuring that it is easy to trace the money back to your separate assets. So, if the money came from the sale of your personal residence that you owned prior to marriage, and then you put that money in a separate account in your name only, that is the only documentation that you need to maintain to prove that this is still a separate asset that you own and not a marital asset. (AZ Rev Stat § 25-213)

So if you mention in the document where the source of the funds came from, meaning the sale of your separately owned assets, that is all that is necessary to document that this is not marital money that is being loaned, but rather your separate money that you own.

Small Business Loan Agreement

Create Document

Full Conversation

Hello, I am looking to have this hard money loan document reviewed. This will be filed in Arizona. I am a married man who sold my personal home which I had before the marriage. I have a $280k gift of equity letter from my father as he was the contractor on the home, and $220k of equity came from the sale of my prior residence, which I owned as a single man when I purchased and sold it. I am lending $400k to my father for a business venture, which will be a 36-month term with a balloon payment at the end and a 5.5% annual interest rate. My goal with this document is to provide a buffer and clarity in case my wife and I divorce. I want to make sure this protects the companies that will use the money and myself, and that it protects the funds.

Lexi, Chatbot

I understand that you're looking to protect your interests in a potentially complex situation. Can you tell me if there are any specific concerns or clauses you want to ensure are included in the loan document?

I don't know.

Lexi, Chatbot

Have you already drafted the loan document, or are you starting from scratch?

It's already been drafted online.

Lawyer, Esquire

Hello and welcome to the site! I am a licensed attorney here to help with your situation. I have read your post and understand you're looking to protect your interests in a potentially complex situation.

Yes.

Lawyer, Esquire

Are you basically stating that this is your separate money, not marital money, and you are loaning it to your father as a personal loan of your separate money? And have you always kept that money in a separate bank account in your name only?

Correct, I want to make sure there is not a way that this can land on one of my family’s businesses in which she could tie that to a divorce. Yes, $400k from the sale of my house went into a personal account of mine with my dad as a co-signer on. I have a $280k gift of equity from my father as he is the contractor who built my house as well.

Lawyer, Esquire

Got it, that is not hard to produce.

Lawyer, Esquire

And I always suggest that customers keep a paper file with times and dates and parties involved and copies of all documentation in it in a safe location just in case it ever becomes an issue where you have to prove the source of funds. Do you have any other questions or concerns that I can help with?

Should I add any clauses or terms into the doc?

Lawyer, Esquire

The loan document is between you and your father. So it doesn't really have anything to do with the source of the funds and whether they are considered marital assets or not. So as long as you put in the agreement where the money came from, you could pull that document out in the event of a divorce and show it to the judge and say, “No judge, see right here is where it says this is my private money that was loaned to my father and it's not marital money.” And I can prove it by tracing back and showing where I sold my house and then the money went into my account.

Easy enough.

Lawyer, Esquire

Agreed. Just keep everything in a file in a safe place that only you have access to if you have concerns about a divorce situation. I'm glad I could help. If you have any more questions in the future or need further assistance, feel free to reach out.

Thank you.

Lawyer, Esquire

Glad to help.

Lawyer, Esquire

25 satisfied customers

Welcome! Have a similar question?

By messaging AskALawyer, you agree to our Terms and Privacy Policy.

Lawyer, Esquire

Attorney at Law

5.00 (25)

[FL] What filings or documents are required to add a new equal partner to an existing firm and make the change legally valid?

Answered 3 days ago

Legal Eagle

Attorney

4.79 (133,377)

[NE] If I own an LLC with my children as minority members and reinvest all profits, do I still need to issue K-1 forms to them?

Answered 4 days ago

Michael M. Esq.

4.61 (75)

Am I personally liable for repaying an SBA EIDL loan taken as a sole proprietor with no business assets?

Answered 1 week ago

Disclaimer

By messaging AskaLawyer.com, you agree to our Terms and have read our Privacy Policy.

The information provided on AskaLawyer.com is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and timeliness of the information presented, we make no guarantees regarding its completeness or applicability to your specific circumstances.

Use of this website does not create an attorney-client relationship between you and AskaLawyer.com or any of its attorneys. Communications through this website, including any responses from attorneys, are not privileged or confidential. For advice tailored to your individual situation, we recommend consulting a licensed attorney in your jurisdiction.

AskaLawyer.com disclaims any liability for actions taken or not taken based on the content of this site. We are not responsible for any third-party content that may be accessed through this website. Reliance on any information provided herein is solely at your own risk.