Protecting your assets during a divorce, at least within North Carolina, can be a difficult undertaking. First, let’s talk about what this article is not. This article is not a way to learn tips and tricks about hiding your money from your spouse. Hiding assets from a partner in a divorce isn’t just inadvisable, it’s illegal. Lawyers can’t help you do it, mediators can’t help you do it, and if the judge finds out, you’re probably going to jail. In my entire career, I’ve never seen a circumstance where someone was successful in trying to hide any large sum of money.
However, here are three key tips that you can use to help minimize the impact of a divorce or separation on your financial status. (Note: As with all online legal discussions there are exceptions to these rules. Make sure you talk to an experienced family law attorney before deciding on any particular course so they can give you individualized advice.)
Tips to Help Minimize the Financial Impact of a Divorce or Separation
1) Make Larger Purchases BEFORE separating from your spouse
I want you to think of your financial state as having two phases. The first phase is during the marriage, where almost everything is jointly owned by the marriage. The second phase is after you are separated from your spouse, when the financial decisions and the bank accounts are now in each of your individual hands. The court takes a “Snap-Shot” of your financial state on the day you or your spouse move out and begins the separation. This second financial state is what the court will be trying to divide.
Any purchase made prior to that separation is assumed to have been used for the benefit of the marriage. Additionally, your bills and expenses at the time you leave are used to determine if your post-separation expenses are “reasonable” for the purposes of alimony. So, despite it seeming counterintuitive, the time to buy a second house, a nice car, or a new wardrobe is before you actually move out of the home. The best purchases I’ve seen before separating are actually for education and making the decision to go back to school. It’s hard for your spouse to argue that you should be working instead of going to school if the decision happened before separation.
2) Keep Inheritance Separate From Your Marital Accounts
The general rule in North Carolina is that anything acquired during the marriage belongs to the marriage. However, inheritance is an exception to that. The biggest mistake I see when it comes to protecting their assets during a divorce, is people use that inheritance money on marital items. They upgrade their home, pay off marital debt, or put it into the marital bank account. All of these things end up haunting them during the divorce.
You need to treat inheritance money like it’s a foreign currency altogether. If it touches your marital accounts, or if you allow your spouse to use those funds like they belong to them, then you can waive this exception. While it is technically possible to get a credit back for inheritance money you’ve spent on marital items during the marriage, in reality it’s hard to achieve without some sort of written proof that everyone agreed they’d pay you back. A safe way to handle inheritance is to just put it in another bank account, or investment account, in only your name. Do not give your spouse access to that account in any form.
3) Document & Protect What Exists
Before moving out you need to ensure you have current account statements for every financial account and debt that you both own. Even if they are just in one of your individual names. These accounts being separate doesn’t matter in most cases. Remember, if it was acquired during the marriage, it belongs to the marriage. You should also pull credit reports for the both of you, so you are able to have a record of all the debts that exist. Then, after moving out, close the joint bank account (or take your name off of it) and remove no more than half of the funds. While it’s technically legal for you to take all the funds, it can be used against you in divorce proceedings and I’ve seen my fair share of people get berated in court for it.
Adjust Your Credit Accounts
You need to close all joint credit cards and remove your spouse as an authorized user on any credit accounts. This will significantly limit the liability they can expose you to during the separation. There’s nothing worse than looking at your credit card statement and seeing that your spouse used your credit card to pay for their divorce lawyer.
Separate Personal Property & Document Shared Property
Finally, separate all the personal property you want, and take pictures or otherwise have a way to account for everything when you or your spouse move out. Don’t be surprised if your priceless family heirlooms go “missing” after this happens. It’s hard to convince a judge that something existed, or that your ex destroyed it, if you don’t have photos of the items or any other proof. A safe assumption is that if you left it when you moved out, you’ll never see it again.
Follow These Tips & Speak with An Attorney
It can be difficult to protect your assets during a divorce, but if you follow these basic tips you’ll be on your way. As with most things in the law, there are notable exceptions to almost every rule. Talking to an attorney and having one on retainer prior to someone leaving the marital home, is the safest way to ensure you, and your assets, are protected. If you’d like to schedule a consultation with one of our attorneys in Charlotte, click here.