Understanding is Crucial to Handling Joint Bank Accounts in a Divorce
Sadly, almost half of all marriages in the United States end in a divorce. Fortunately for these people, competent divorce lawyers exist to make the process less confusing and time-consuming.
For some, the problems involved are exacerbated by financial concerns. Either they have money they want to protect or there is not enough at hand. It may seem the solution is to delve into the family bank accounts. Yet, there are serious legal and personal issues to consider. Nobody wants to wind up in trouble with the courts for withdrawing money from a joint bank account.
To help readers better understand how to navigate this delicate situation, here is an examination of joint bank accounts in a divorce.
What is a Joint Bank Account?
Couples usually open joint bank accounts, since under common law everything in a marriage belongs equally to each spouse. This fact means that 50% of the funds in the account technically belongs to each person. Either one can withdraw that money at any point during the marriage. Most people choose not to do so because obviously most of the money is necessary to manage the household.
How does Divorce Change Things?
After the filing of a divorce, things change in most states, including Massachusetts. Courts accept the divorce request and then issue an Automatic Temporary Restraining Order (ATRO) to coincide with the summons notifying the other party of the lawsuit.
At this point, neither spouse can withdraw funds proscribed under the court order. In effect, the 50% rule no longer applies at the moment the judge acknowledges the divorce suit. Parties are allowed to continuing withdrawing funds to pay for the ordinary expense of living, in the ordinary course of maintaining a business, the ordinary course of investing, and attorney fees.
That said, judges seem to prefer that the litigants work out financing themselves. As one can infer, it is difficult to live and pay legal fees while under an ATRO. The optimal situation is for the spouses and divorce lawyers to hash out a more equitable agreement. However, to protect the assets until the court is able to do some assessment of the aggregate value of the family estate, the ATRO remains the norm.
Options before an ATRO becomes effective?
- Withdraw 50%
- Withdraw a significant amount but less than 50%
- Just withdraw daily expenses
- Proceed as prior to the marriage
Ramifications of withdrawal?
Withdrawing 50% of all assets has two main drawbacks. First, doing so may put the family in a financial bind. For example, even though each person has a legal right to the earnings in the accounts, there may be a surplus used to pay for taxes, bills and medical expenses. When the need to pay a large bill arises, the account could be overdrawn. Perhaps more likely, the other spouse may have to foot the amount from their own share of the earnings.
This negative scenario leads to the second problem with making a large withdrawal. Taking half of the assets creates an air of distrust in many divorces. It is similar to a bank run during a financial calamity, such as an economic depression, with everybody trying to beat everyone else to bank. Both parties will begin withdrawing, hiding and concealing assets, hoping to preserve that what they can salvage. This type of behavior may not the best way to handle a divorce.
Get Advice From a Divorce Lawyer
As witnessed here, handling finances during a divorce is no easy feat. Common law allows each spouse to leave with up to half of the all the money in joint bank accounts. The courts try to protect each party by limiting withdrawals through the ATRO. These two realities seem at odds. Hence a divorce lawyer is usually the best source of advice on how to proceed in each particular case.
Money is the source of many marital problems and can lead to similar negativity during a divorce, especially when handled without professional legal counsel. Contact our attorneys today to discuss your situation for free. No divorce is exactly the same, we can help answer your questions.