How to Cover Your Assets in Advance of a Divorce

On behalf of The Marks Law Firm, L.L.C. posted in Divorce and Marital Property on Friday, April 4, 2014

We hear client horror stories every week – bank or retirement accounts disappear, locks changed on the residence, automatic bill pays stopped.  In a short window of time, a spouse can drain or conceal marital assets, leaving the other spouse in a world of hurt.  While the court may eventually learn of all the maneuvers and take that into account in dividing the marital property and debt, the many months between separation and a final dissolution can leave one spouse in financial straits.

The most important steps a spouse can take in contemplation of divorce is to be proactive in assuring financial stability and preventing a dissipation of marital assets.

We should note at the outset that draining marital assets, while not necessarily illegal (depending upon the circumstances it could be fraud or theft) is considered a contemptible act in certain counties in Missouri.  So, for parties that believe taking a short term quick fix on finances or seek an early advantage on controlling marital assets, think carefully as you could face severe consequences for these actions.

Despite these warnings, many parties will try to take control of some or even all of the major marital assets.  So, what can you do to prevent this or protect yourself?

First, you need to know what your marital assets are.  Yes, this sounds somewhere between simplistic and silly to many, but we see time and again how even knowledgeable spouses still are unaware of how the other spouse has hidden assets away.  So, before separation, sit down and make an inventory of all major assets.  Collect account numbers and current balances.  Review statements to see if you notice any odd purchases or withdrawals.

Second, now that you have a good idea of all of your assets, do the same with marital debts.  Collect every credit card statement and list each account’s balance.  Go online and get a free credit report and see what accounts may be attached to your name – open accounts with or without a balance.  You may find some strange activity that causes you concern.

Third, protect your income.  Open a separate bank account into which you deposit your earned income.

Fourth, get a complete copy of your last three years of tax returns.  These filings will give you real numbers tied to income and the sources of that income, including capital gains and losses, stock activities, outside income and unusual deductions.

Fifth, try to freeze the marital pie.  You should consult your attorney or accountant to determine how to handle these steps.  Essentially, you can remove yourself from joint credit accounts to save you from personal liability should your spouse become a spendthrift.  You can also place limits on withdrawals of joint banking accounts without both parties’ signatures.  Retirement accounts that operate as mutual funds should have specific instructions about withdrawals or changes in activities.  While the temptation will be strong to be the first spouse to drain the account to prevent the other spouse from doing so, draining any accounts could put you in jeopardy later; freezing accounts or assuring limited liquidity or two-person consent assures no money disappears without your knowledge and approval.

Sixth, now that you have separated accounts for yourself and done the best you can to protect the joint assets, keep excellent records and monitor all account activity.  Apps and software exist to alert you for all transactions.

Remember that keeping your finances in stasis during separation and divorce serves your best interests.  Draining accounts, particularly retirement or pension accounts, not only deplete marital assets but also have severe tax consequences that could cost you far more than you realize.

What if you do not work and rely on your spouse for funds?  In this scenario, having your spouse close off access to the accounts could leave you literally unable to provide for yourself.  If you know you could face this situation, you should discuss with an attorney how to protect yourself at the outset of the divorce process so that you have some funds to care for yourself until the court enters a PDL (a temporary order relating to support and maintenance and property).

Ideally, spouses should be able to sit down and discuss all the financial matters and act rationally prior to divorce.  In reality, most couples have trouble reaching such a meeting of the minds.  Consequently, you must advocate for yourself and protect your interests, but do so both for the short and long term.  Only an experienced attorney can guide you through the right ways to manage marital assets prior to and during divorce.

If you have questions about safeguarding your assets prior to and during divorce, contact our St. Louis divorce attorneys – we can help.