We Have Separate Bank Accounts
Divorcing couples either have separate bank accounts or joint bank accounts. My husband and I use a joint bank account to pay bills and for savings. We have separate bank accounts for our IRA’s. The couples with the separate bank account worry me a little, because they eventually ask if the money in these accounts is theirs. When they do, I have to break the bad news.
All bank accounts, established after the marriage and funded with marital funds are considered owned by the marital community. It doesn’t matter whose name is on the account. The name on the account is not indicative of who owns the account for divorce purposes.
Who Owns the Money?
Courts look at bank accounts in two ways; community property or separate property. Community property, like the money, in a bank account, would typically be divided equally. Separate property is kept by the owner of the account. Separate property would be awarded to the person who is judged to be the sole owner of that separate property.
What is Community Money?
The word “community” is a label the divorce courts use to describe assets as being owned by both husband and wife. If you purchase a vehicle while married the vehicle is called a community vehicle. If you used your credit and the vehicle is titled in your name, it is still considered community. Same goes for a house, money, stocks, furniture etc. During a divorce community property is equally divided.
When couples come into a marriage with assets, or are gifted assets then the court labels these assets as “separate” and not part of the community. For example, you came into the marriage with $50,000 in a bank account. You never added your wife’s name to the bank account. The money would probably be separate property and not subject to being divided equally in a divorce.
When is Separate Not Separate?
The issue of comingling of property exists when separate property is comingled, or mixed, with community property. When this happens, the separate property is then considered to be community property, and will be split equally between the divorcing parties.
Comingling can happen in several different ways. One common scenario is adding your spouse’s name to a bank account. Let’s say you added you spouse’s name to your $50,000 bank account. You and your spouse use the bank account to deposit paychecks and pay bills. The original $50,000 has now been joined, or comingled. A family court judge would probably consider the $50,000 as community property.
Another common scenario of comingling would be if you didn’t added your spouse’s name to the bank account, but used the account to deposit paychecks and pay bills. The court would probably consider the original $50,000 as community property. In this scenario, a good divorce attorney could make some legal arguments of why the money should be separate. The record keeping would determine the success of this argument.
How to Keep a Bank Account Separate?
This advice may be too late, but there is a way to keep a bank account completely separate from being considered marital property. First, the account should have only your name on it, not your spouse’s. Second, no deposits should be made into the account that could be construed as community property. For instance, money earned during the marriage cannot go into the separate account. Third, any inheritance money or gifts made to you can go into the separate account, but only if they are intended solely for you. If the gift has you and your spouse’s names on it, such as a wedding gift check, it can’t go into the separate account without comingling the funds.
Remember to keep detailed financial records of all deposits and withdrawals from all bank accounts before, during and after a wedding. These records will help determine if a bank account can be considered separate.