Some married couples combine everything they own and earn with one another. They have joint credit cards and both deposit their paychecks into the same checking account. Others might keep as much of their property separate as possible.
Each spouse may have their own lines of credit and separate checking accounts. They may even separately fund retirement accounts. Sometimes, those preparing for divorce and worrying about the implications of equitable distribution rules may believe that they don’t have much property to split.
They may operate under the assumption that each spouse simply keeps the assets they have in their own name. That is an overly reductive approach to property division. Separate accounts are not necessarily separate property when people divorce. They may still be subject to division.
Timing matters more than the name on the account
People need to establish what assets and debts are marital and which ones are separate property. For the purposes of property division, there are several key factors to consider. The first is whether the spouses have a marital agreement.
People sometimes have prenuptial or postnuptial agreements clearly designating specific assets as their separate property. If spouses agreed in writing to keep their retirement savings and other financial accounts separate in the event of a divorce, then they can likely do exactly that.
However, without a written agreement, those separate accounts are likely part of the marital estate. At least a portion of the spouses’ funds and financial obligations are probably subject to division. Any deposits made with marital income are subject to division.
Additionally, any debts accrued during the marriage for the purpose of supporting the family unit are likely part of the marital estate as well, even if the credit card or loan is in the name of only one spouse. Spouses may have to make in-depth disclosures to each other and the courts and negotiate at length to arrive at appropriate property division terms.
Learning more about the difference between marital and separate property can help people approach the property division process during a divorce in a reasonable and realistic manner. Separate accounts do not necessarily shield assets or debts from division during divorce.