Those preparing for divorce often have a very challenging financial process ahead. They have to take account of all of their assets and debts and then determine the most reasonable way to divide them with a spouse. Almost everything people acquire during marriage is subject to division during divorce proceedings. However, spouses can sometimes exclude certain resources by claiming them as separate property. They may also be able to designate certain debts as the separate responsibility of one spouse.
Does a separate account ensure that the courts should treat assets or debts as separate property during a divorce?
Account ownership isn’t the main consideration
One spouse might point to only having their name on a retirement account as an indicator that it is their separate property when they divorce. Either spouse might try to insist that the other is the only party responsible for a credit card because it is solely in their name.
Separate accounts are not automatically separate property during divorce. Instead, the courts look at several factors when deciding how to allocate the contents of an account or responsibility for paying a debt. One of the most important is when the account holder contributed funds or took on the debt.
A credit card opened during the marriage and used to pay basic household expenses is probably the responsibility of both spouses even if the account is in the name of just one spouse. Retirement, checking and savings accounts are similar. While only one spouse may have their name on the account, contributions made using marital income make the account likely subject to division during divorce proceedings.
When it comes to dividing debts, the courts may also consider the reason behind taking on the debt. If one spouse opened a credit card that they then used to pay for an extramarital affair, their spouse may not have any responsibility for those adultery-related expenses. Similarly, if one spouse opened a new line of credit shortly before filing for divorce and used it in a manner that deviated significantly from their usual spending habits, the courts may view that as dissipation.
There is a degree of nuance when addressing accounts held in the name of just one spouse. Understanding the difference between separate property and separate accounts can be helpful for those trying to obtain a fair outcome to their property division proceedings during a divorce. As such, a thorough financial review is necessary in most divorces involving valuable assets and high levels of debt.
