Concerned About Your Finances In A Divorce?

Untangling your personal finances can be one of the trickiest parts of getting divorced. After years of pooling income and viewing your assets as belonging to both spouses, determining what each will walk away with when the divorce is finalized is almost never as simple as dividing everything down the middle. Having separate bank accounts at the right time can be essential in navigating the divorce process without creating undue hardship or added confusion.

However, it’s essential to understand what you can and cannot do financially when you are divorcing to avoid making missteps that can have serious legal consequences. Continue reading to learn more.

• Why Separate Bank Accounts
• Separate Bank Accounts Don’t Necessarily Equal Separate Property
• What You Should and Shouldn’t Do Financially During Divorce

Concerned About Your Finances In A Divorce?

Why Should I Consider Separate Bank Accounts?

There’s long been a presumption that married couples will automatically share a joint bank account. That strategy can certainly simplify the task of understanding how much is available to pay bills, provide transparency on finances to both spouses, and make it easier to create an overall budget when partners are able to work together. The drawbacks to joint accounts become quickly evident, though, when that marriage is coming to an end.

If you don’t already have a separate bank account from your spouse prior to divorce, when should you open one? Everybody’s situation is unique, so it is best to consult an experienced family law attorney to get advice specific to your circumstances.

In general, after the date of separation, each spouse’s income is considered separate property, even if the marriage has not legally ended. Couples often open separate accounts after separating to prevent mixing separate funds with community property, which can complicate property division during divorce.

A more urgent reason to open a separate account arises if a spouse fears losing financial access during divorce or if there is a history of financial abuse or domestic violence. Opening an account before filing can protect you from immediate financial harm, such as a spouse draining joint funds or restricting access to retaliate.

Regardless of the reason, keep careful records of all transactions in separate accounts, even if you fund them from a joint account. During the divorce process, you must disclose the existence and balances of all accounts.

Separate Bank Accounts Don’t Necessarily Equal Separate Property

What happens when a couple has separate bank accounts prior to divorce?

Spouses may choose to maintain separate bank accounts in marriage for a variety of reasons. For example, a spouse may want financial independence and not have to clear every purchase with their partner. Or they might try to protect money from a spouse’s premarital debt by placing it in an account under the other spouse’s name.

However, money in a separate account is not automatically that spouse’s separate property.

Unless a prenuptial or postnuptial agreement specifies otherwise, any income earned while married but before separation – and any purchases made with that income – counts as community property, belonging equally to both spouses. Similarly, debt incurred by either spouse during the marriage is typically considered the responsibility of both parties.

For example, each spouse may deposit their salary into a separate account during the marriage. That choice does not mean each spouse automatically keeps the money in those accounts after a divorce. The law still requires both spouses to disclose those accounts. The court then considers them along with all other separate and joint accounts and property when creating an asset division order that is fair to both parties.

Certain assets may qualify as separate property if they meet statutory requirements and remain unmingled with marital property. This includes property you owned before marriage, as well as gifts or inheritances you received individually during the marriage. Learn more about what is not considered community property in California here.

Keeping funds in a separate account and tracking them carefully apart from marital property can help establish your individual right to those assets. However, courts often treat assets in ways that make their status unclear, even if they started as separate property.

 Hiring a forensic accountant to conduct a financial inventory and asset tracing may be able to help determine if an asset still meets the criteria for separate property, based on its origin and use in the marriage.

What You Should and Shouldn’t Do Financially During Divorce

Money is an emotional issue, and people often make financial mistakes during divorce due to impulsive or poorly considered actions. Consult a knowledgeable attorney promptly and follow their guidance carefully to avoid errors with long-term consequences.

An attorney becomes even more essential when spouses have disproportionate incomes. These situations often involve complex property division and spousal support issues that are difficult to resolve fairly without skilled representation. Learn more about complex property division here.

Remember, divorce law requires full disclosure of all assets. A separate account does not make an asset private. You may feel tempted to hide or misrepresent assets, but doing so only increases conflict during settlement negotiations. It also harms your credibility with the court and may result in losing the asset entirely to the other party.

Transparency leads to better outcomes. Working with the right professionals can help you fully understand your financial situation and the consequences of any proposed asset division. This approach improves your chances of leaving the marriage with your fair share of the marital property.

Protecting Your Financial Interests in Divorce

Understanding the financial impact of divorce can be surprisingly complex, especially when emotions run high. The expert family law attorneys at Hoover Krepelka have extensive experience negotiating property division, even in the most complex cases. We work diligently to protect your financial future. To schedule a consultation with an attorney, fill out the form below today.