You Should Know: Are Separate Bank Accounts Marital Property?
Protecting assets may feel important even in a happy marriage, but are separate bank accounts marital property?
Most people are shocked to find out that, most of the time, separate bank accounts are still marital assets. There are some exceptions to the rule, but overall, assets brought into the marriage, no matter whose name they are in, become community property.
What Is a Marital Property?
So, what is marital property?
Put simply, marital property is any assets earned or debts obtained after the marriage began. It may include bank accounts, investment funds, vehicles, or houses purchased during the marriage.
The only typical exception is any assets brought to the marriage that a partner earned or gained before the marriage. Common examples include an inheritance or property you previously owned.
But there's one stipulation: you must prove you did not commingle the separate account or assets during the marriage. This means your spouse did not benefit from the asset in any way.
Keeping a careful record that you kept the asset completely separate is the only way to ensure the courts treat it as separate property.
A common example of commingling premarital assets is a vacation property. Say you inherited a vacation property before you married, but you and your spouse used the property during the marriage. This makes the property commingled, losing its title as a separate property.
Are Separate Bank Accounts Marital Property?
Separate bank accounts are not exempt from the marital property division just because they are not joint accounts. It doesn't matter whose name is on the bank accounts.
If you have funds earned or acquired during the marriage, they become a part of the community property and are not considered separate property.
What Percentage of Married Couples Have Separate Bank Accounts?
Despite separate bank accounts counting as marital property, 10 to 15 percent of married couples keep separate accounts. Around 65 percent of couples have only joint accounts, and the remainder keep separate and joint accounts.
What Makes Separate Bank Accounts Marital Property?
You might wonder how the money you keep in an account with only one spouse's name becomes marital funds. Here's how.
When you are married, you have assets both partners benefit from, such as creating community property. The earnings either partner makes during the marriage become community property, whether joint or separate, no matter the type of account you own.
The only way to keep separate property from marital funds is to prove that the funds acquired before the marriage never benefited the marriage. However, this requires careful records, and the judge can still consider them marital funds based on the evidence provided.
Reasons To Consider Separate Bank Accounts in Marriage
You might wonder if separate bank accounts are even worth the hassle if the funds are considered marital property, but there are some reasons to consider it.
This isn't a list of why joint bank accounts are bad, but instead, reasons to consider a hybrid joining of funds (separate and joint accounts).
You think your marriage will end in separation: In most states, after legal separation, each partner's income remains separate property.
Fear of financial infidelity: If you worry your spouse will cut you off or isn't exercising financial transparency, you may want your own funds to rely on.
A feeling of independence: Some couples like to have an account in their own name to instill a feeling of financial independence while also focusing on combined goals.
Protect funds from spouse's premarital debt: If your spouse had debt before the marriage began, you might want to keep your funds separate, so they don't pay for the debt you didn't incur.
What Happens To Separate Bank Accounts During a Divorce?
What happens to separate bank accounts during the divorce process depends on how the judge views the assets. If the accounts are a part of the marital funds, they will likely be divided equally because they are considered community property.
However, if you have ample proof that the funds were not commingled during the marriage, you may be able to avoid the equal division of those assets.
4 Steps To Protect Your Assets During a Divorce
If you and your spouse have tried everything, including marriage counseling, to fix the marriage, you should know how to protect your assets during a divorce.
Get a separate bank account: If you know one spouse is filing for divorce or separation, open separate bank accounts and split the joint assets equally. The judge still has the final say in how the funds get divided, but at least you'll have an account in your name and can prevent your spouse from taking all the funds, leaving you with nothing.
Get legally separated: Make your separation legal. This provides court protection and specific court orders for handling current and future assets or debts. You reduce the risk of financial ruin by an angry spouse.
Keep careful records: Keep records of every financial transaction, including money earned and spent. This eliminates the risk of being accused of financial wrongdoing in court.
Gather paperwork for separate property: If you brought the property to the marriage that you kept completely separate, provide the necessary paperwork to prove this.
For additional support, consider speaking to a financial coach.
FAQs
Can I Empty My Bank Account Before Divorce?
Any assets in the bank accounts when you file for divorce may be community property.
Even if you empty the bank account before divorce proceedings, the judge can award the assets to your spouse if you operated in bad faith. It's best to be honest about all assets and let the court decide how they are separated.
Is It Bad To Have Separate Bank Accounts When Married?
No two marriages have the same outlook on bank accounts, so the answer to 'Should married couples have joint accounts?' depends on your relationship.
It's not bad to have separate accounts as long as you have a workable plan to cover the household bills and can keep both partners on the same page financially.
Are Separate Bank Accounts Safe From Divorce?
Separate bank accounts are not safe from divorce except in extreme circumstances. Typically, they become part of the marital funds, regardless of whose name is on them.
Does a Wife Have Access to Her Husband's Bank Account?
A wife can only access her husband's bank account if her name is on it. Separate bank accounts do not allow anyone else to access the funds. This can prove troublesome in an emergency when the named spouse cannot manage the funds due to injury or illness.
Does My Husband Have To Pay the Bills Until We Are Divorced?
Until the divorce is final, both partners are equally responsible for the bills. During the divorce proceedings, the judge will decide who is responsible for each debt.
Is It Legal To Hide a Bank Account From Your Spouse?
It is illegal to hide a bank account from your spouse if you go to court. During the marriage, there aren't any laws stating you must disclose accounts to your spouse, but they are a part of the marital assets if you divorce.
Can You Move Money Around Before Divorce?
You can move money around before divorce, but no matter where it is, the judge will likely consider it a part of the marital assets and divide it accordingly.
Can I Remove Myself From a Joint Bank Account During Divorce?
You may be able to remove yourself from a joint bank account during divorce if the bank and state laws allow it. However, waiting until the divorce is final and the funds are separated is best.
Is There a Way To Protect Your Assets Without a Prenuptial Agreement?
A prenuptial agreement is the best way to protect your assets, but there are still options if you don't have one.
The easiest way is to prove you have separate property that you did not commingle in the marriage. You can also consider a postnuptial agreement or put the assets into a trust before marriage.
Your Personal Accounts Are Marital Property
Overall, separate bank accounts are considered marital property and aren't exempt from the equitable distribution in divorce.
If you're worried that your marriage is in trouble, first consider marital or financial counseling to see if you can get back on the same page. If not, gather any paperwork proving you have separate assets, or prepare to have most accounts split between partners.
If you're in need of financial counseling, schedule a consultation today!
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Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
