Protecting yourself from the worst of divorce when you’re married

Every divorce started with a marriage. Even in happy relationships, spouses can take steps to protect their finances if they ever divorce.

Records

Taking these measures during your marriage can help protect your interests during property division proceedings and negotiations, should your marriage later end in divorce.

First, keeping your financial records will help you to know about your financial condition, and prove or contest separate property.

Keep tax returns, bank and brokerage statements and real estate information such as deeds, purchase and refinance documents and mortgage statements.

Lawyers and experts determine the marital estate by reviewing the dates that assets were obtained and then determining whether these assets are community or separate property or a combination of these two. Property classification is based on the source of funds used to acquire these assets and other factors.

The IRS and brokerage firms keep tax returns and other financial documents for a limited time. Saving your statements and financial documents in electronic files as they are received helps assure that they are available if you ever need them, especially for longer marriages.

If a couple disagrees on whether property is community or separate, they may need forensic tracing. Having documents and information available can expedite this process and lower costs.

Accounts

When you are married, open new accounts and begin depositing all your earnings in these accounts. Keeping your funds in a separate account improves their chance of being excluded from community property. But do not transfer funds from community accounts into your separate accounts.

Community funds should be deposited into joint accounts. Commingling funds may require a forensic analysis to reclassify them as separate assets.

Knowledge is power

It is reasonable for one spouse to handle the couple’s finances. But spouses should still discuss important financial issues. They need to consult with each other and reach agreement on important decisions.

Review tax returns, trust documents, deeds and other documents that you are asked to sign. Seek information and know about household expenses, and the identity and amounts in different accounts.

Attorneys can assist spouses with planning and preparing legal documents. They can also help them seek a fair and reasonable divorce decree.