Married With Separate Assets

Having represented hundreds of married couples, we have seen plenty of them present to us for a divorce with the proverbial separate bank accounts.  It seems there is a correlation between a separate bank account and a separate heart.

Money, as with sex and religion [and we would hasten to add, children], is one of the primary things that couples argue about and get divorced over.  Money, as the bible tells us, is indeed the root of all evil.

Even so, if evil, money is a necessary evil.  Here are some potential problems with couples that maintain separate bank accounts and assets:

1. Mistakenly separate property.  If a couple gets married and brings their separate accounts to the marriage, even without overly co-mingling the assets by creating a joint account, such property can eventually get co-mingled over time and become part of the marital estate.  An example of this would include where one spouse uses the funds from a separately titled account to pay marital bills.  When you enter into a marriage and desire to keep your separate property separate, you have to be certain to segregate the property.  Even when you do, us lawyers love to find ways to "invade" the separate property of the moneyed spouse and haul it into the marital estate.  If you are getting married but insisting on the maintenance of separate property, then you should consider executing a prenuptial agreement.
2. Separate property has greater exposure to creditors.  When you are sued by creditors or file for bankruptcy, joint assets are unavailable to satisfy the judgment creditor and the bankruptcy trustee.  Now be careful here; you cannot just go plunging your money into a joint account to avoid creditors.  That would be deemed a fraudulent transfer made to avoid creditors and such assets may be used to satisfy the creditors.
3. Administrative complication upon death.  If a married couple maintains separate checking accounts, then some administrative issues will arise in the event that a spouse dies.  For example, the surviving spouse may need to secure a death certificate prior to accessing the funds in the account, assuming that she was named as the power of attorney.  This is not inherently difficult to do but, do you want to be doing it amid the funeral and burial of your loved one.
4. Separate accounts do not encourage financial communication.  Finally, maintaining separate accounts does not foster open communication between spouses about their finances.  The other spouse is left to guess as to the net worth of the individual, the net worth of the marital estate.  One spouse may never know about any savings cushion unless asked.  The overall financial picture of the couple remains hidden from full view.  When it comes to finances, this is usually not a good thing in a marriage.

Maintaining separate assets is a tactic that most often comes from old habits dying hard.  We find that the older a couple is when they get married, the more likely one or both partners will maintain that separate checking account, or keep that one asset in their sole name, almost like a symbolic insurance policy.  But we have to ask, insurance for what.

Going "all in" with joint accounts and jointly titled assets is the better plan for the long term marriage.  This is especially true if the couple executes estate planning documents shortly after their nuptials.

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