Divorce and Finances: Is Anything Safe?
Financial matters rank at the top of the list of worries for anyone during a divorce. The concern of one less income and the potential need to replace belongings can make people wonder about their future bank account balance. Knowing what assets are at risk — before filing paperwork or negotiating an agreement — can make planning for the future easier.
Balances of Bank Accounts
Marital property usually includes all items purchased and any money earned during the marriage. The money kept in bank accounts, even if the couple keeps separate accounts in their names, is marital property. The court will usually include the balance of the accounts at the time of the divorce filing as a cash asset to divide.
People that have a checking or savings account they had before marriage may have some ability to protect the pre-wedding balance. To make this possible, the owner of the account would need to show balance statements from the months before their wedding. The statements may help, but they do not guarantee the money will stay safe.
Inheritances from Family Members
Inheritances left to one member of the divorcing couple should stay the property of that person. Just because an inheritance came from a relative does not mean it is instantly protected. The heir must prove that the money or property was left to them alone and not to the couple. A copy of a will or deed where the property changed hands is also needed.
Trusts created before the marriage or set as an irrevocable trust usually remain protected. All the details of an irrevocable trust will stay the same after the divorce. The funds go to the beneficiaries listed on the trust when the grantor of the trust dies. Parents can feel secure the inheritance they want to someday leave for their children can stay safe.
Accounts for the Children
Bank accounts that belong to adult children but include a parent on the account as well can remain the property of the child if they are the only ones that use them. An example is a saving or checking account established when the child was under 18. The parent’s name may remain on the account despite the adult child being the only one accessing it.
Lawyers may request copies of statements from these accounts to see who has made deposits and withdrawals since the start of the divorce process. An order to divide the money could occur if the court believes a parent is using the account to hide their money and not making a deposit for the benefit of the child.
Another bank account at risk is a 529 college savings account. A parent can withdraw money for any purpose if they are on the account. The withdrawals will include a fee, but the parent could empty the account if they want. If possible, include an agreement in the divorce order for the account to stay untouched. If not possible, take other steps.
A judge can order a freeze on a 529 account to prevent this activity. A freeze on the account will not allow any money to go in or out until the child needs it for college. Parents can establish another account once the divorce is final to continue to help their child save for school.
Every marriage and every divorce have unique circumstances. How the division of assets takes place can vary in every situation. The complexity of the laws makes it almost impossible to feel secure during a divorce proceeding. At the Law Offices of Lynda Latta, LLC, we can help. Contact us for a consultation to discuss your financial situation and how to protect your assets. Call today.