How to Protect Your Money in Case of Divorce
If you keep your finances separate during your marriage, don’t expect them to stay separate if you split up.
As CNBC reports , many people assume that keeping accounts and assets in their own name will protect them in the event of a divorce, but they are wrong.
“People will think, ‘Well, the house is in my name, so I have to leave it,’ or ‘I put all my income in my separate bank account, so it’s all mine.” – Susan Guthrie, Family Law. attorney and mediator, reports CNBC Make It.
But this is “100% wrong,” she says. Regardless of the laws of your state, after you get married, you should never simply assume that your assets will remain yours in the event of a divorce.
Some states have so-called “public property” laws, meaning that any property earned or acquired during marriage belongs to both partners, regardless of which partner’s name appears on the documentation.
However, even if you live in a state where public property laws do not apply, you may still be asked to share savings and assets with your future ex-spouse, even if those savings and assets were held in segregated accounts.
This means that if you want to protect your finances during a divorce, you must establish this protection prior to marriage.
In other words, a prenuptial agreement.
Remember, a good marriage contract is for both partners. It is not just a tool with which you can say, “This is my material and you can never get it.” It is also a document that allows you to clarify what a partner with less assets or lower income potential is eligible for, especially if the lower-income partner takes on caring responsibilities or runs the household while the higher-income partner is pursuing a career.
Ideally, your marriage contract should be a win-win for both parties. If not, it could be a sign that you need to have some potentially difficult conversations with your spouse-to-be, or that you may need to reconsider the partnership altogether.
This does not mean that you should not keep separate bank accounts during your marriage. Couples who maintain separate accounts or follow the popular system of managing separate and shared accounts can retain some freedom in spending without having to consult with their partner (or ask permission) for personal day-to-day purchases. Separate bank accounts also protect people in the event of domestic violence; it is easier for a partner with his own money to get out of the situation.
However, you cannot use separate bank accounts as an inexpensive way to avoid a prenuptial agreement. Take the time and pay the money to consult a lawyer and get a fair marriage contract (yes, even in the middle of an already stressful and expensive wedding planning season). Be sure to ask about financial situations that may arise in the future, such as inheritance, and how you and your partner can deal with pre-existing financial problems such as student debt.
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