This is the fourth post in a four-part series about preparing for the financial strain of the California divorce process.
Untangling Your Marital Estate During Divorce: From Conceptual To Concrete – How To Begin Separating Your Finances
If you and your spouse have separated, it may be a good idea for each of you to open separate bank accounts. If you receive a paycheck, you can begin depositing that check into your separate account. This will help to establish a clear divide between your community property funds and your separate property earnings, which can go a long way towards facilitating the future division of your accounts. Similarly, if your spouse pays you monthly child support and/or spousal support, those funds should also be deposited into your separate account.
Second, if financially feasible, pay your regular expenses out of the funds in your newly separate bank account. It is also a good idea to keep a running log of your reoccurring expenses. This is not only financially prudent, it is also something you will eventually have to disclose as part of the disclosure process.
Third, if you use a credit card to pay for day-to-day expenses, you should take out a credit card in your own name and use that credit card for your expenses. Ideally, you should also pay off that credit card with funds from your separate bank account. If you and your spouse have a joint credit card that carries an interest-accruing balance, try to reach an agreement wherein you pay off the credit card balance before incurring additional charges on the joint card. If the debt was incurred during marriage, it will likely be a community debt for which both you and your spouse are jointly responsible. However, post-separation debts, including interest accrued thereon, are the separate property debt of the spouse that incurred the debt. Meaning, if after you separate you continue to rack up a huge credit card bill for personal expenditures on a joint card, allocating that debt between you and your spouse will become increasingly complicated…which means time consuming…which means attorney’s fees.
Fourth, review your bank and credit card statements for any automatic bill payments you or your spouse have set up. Many clients will often unknowingly divide or close accounts that have a recurring bill pay feature set up and then fail to receive a notification when that bill has not been paid post-closing and is now past due. Arranging for such payments to be made from a new account is generally easy to do, and the effort required to do so far outweighs any possible credit implications that may result from overdue bills. The same is true of ensuring any automatic deposits going into a joint account are received by the intended party.
If you have questions about this or are contemplating a separation or divorce, we encourage you to contact us to arrange a consultation in advance so that we may be able to help guide you through this complex process. No one needs to go it alone and we are here to help.
By: Matt Jennings
Attorney at Johnston, Kinney & Zulaica LLP