Two Key Issues To Keep In Mind When Protecting Your Finances During A Divorce

When talking about how to protect your finances in a divorce, there are really two issues. There’s protecting overall your assets, and then the second issue is how to temporarily protect your finances during the divorce process? I’m going to address those both briefly.

Let’s talk about the temporary issue first. Let’s say that you’re the spouse that’s making the majority of the income, and you’re worried that your finances are going to be depleted. In other words, if you have a joint account and all your money is in this joint account, either spouse can go in and pull out all of that money, so you’re worried about that. This applies with any joint assets including stock accounts.

So how do you protect your finances so that it all just doesn’t disappear? I think the answer to that would be to do something that I call a financial safety plan prior to the divorce. This is where you would come in prior to filing for divorce and really look at how to adjust your finances. You might want to put some money into separate accounts so that the other spouse can’t withdraw all the money, but you also don’t want to put all the money into separate accounts and look like you’re trying to freeze out the spouse.

a hand grabbing a bunch of coins

The longer-term issue of how to protect your finances is really about separate property versus marital property and levels of contribution. Anything that was earned prior to your getting married is separate property and should be kept in separate accounts with only your name on it. These assets would not be split in a divorce. If you own a home prior to getting married, that home is your separate property. There may be a marital element to it because it may have increased in value during the marriage, and that increase in value would be marital. However, the corpus or amount of money it was worth the day you were married, is separate property.

If you have stock accounts, let’s just say stocks, bonds, etc…, that you have prior to marriage, those are also separate property. If there’s an increase in value in those accounts during the marriage, the increase in value will be marital. You need to understand what is separate, what is marital. Make sure your separate property has remained separate.

You can’t hide funds. That’s not right and not OK, but what you can do is create 529s, which are accounts for your children for their college funds. You can give gifts to your children. There are a lot of things that you can do, as a couple do, that take money out of the marital estate prior to filing for divorce, but it needs not to be done in contemplation of divorce. It needs to be done with the other spouse’s knowledge, but you can do that kind of financial planning ahead of time.

Assets are divided equitably during a divorce; equitably, fairly, and so it’s quite subjective. That’s really where having a good lawyer makes a difference. Under the circumstances, what is fair in terms of dividing up your assets and debts? In this article I can’t get into detail because it’s so specific to your situation. If you’d like to discuss that more, please feel free to give me a call. We’ll do a consult over the phone to just get a sense in your particular situation how those assets and debts might be divided.