Joint Accounts...What Should We Do?

Many loose ends will need to be tied up as part of the divorce process. Among the most important are the joint accounts once shared during the marriage. Savings and checking accounts, credit cards, equity credit lines, safety deposit boxes, investment and similar type holdings, and property ownership are issues that will have to be resolved before the actual final divorce can be granted.

Obviously, all joint bank savings and checking accounts will have to be liquidated and in some proportion divided. It is a good idea at time of separation to open a new checking or savings account in your own name and make a deposit to it. This ensures that you will have fiscal reserves in time of need and that no one but yourself can access the accounts.

Unfortunately, closing accounts is not always a clear cut issue. The operating procedures to do so may vary from state to state. The best way to determine what is the best course for you and your spouse may be to consult an attorney, or a local law library.

Joint Bank Accounts
In dealing with the joint accounts, there are several options available to you and your spouse.

  • ask your banking institution to "freeze" the accounts in question and not allow monies in or out of these accounts without authorization by both parties
  • empty all joint accounts into one frozen account to be dealt with in the same manner as the first option.
  • open  an “escrow" account, in which an officer of the bank is assigned to monitor the account. The bank officer must be given written authorization before any transaction may be conducted.
  • one spouse can take out half the money in a given account and deposit it into his or her new individual account, leaving the joint account as the other spouse’s individual account.

If specific arrangements are not made for the joint bank accounts, you will give your spouse the opportunity and means to liquidate an account without your knowledge. If this does happen, the court will probably provide for reimbursement, but that could take months or years,  leaving you to deal with the consequences in the immediate future.

Joint Credit Cards
To close joint credit, write the creditors and notify them of the impending divorce. Request that the account be closed and that the cards be canceled. Ask them to provide a current statement of account and make them aware of the fact that you do not intend to be held liable for any and all debt accumulated after the date of the written letter. It is wise to send these letters by certified mail to retain proof of receipt by the creditors. In some instances, the creditor will ask that the outstanding balance on an account be paid in full. If it is possible to comply with this, then do so. If not, at the very least, have them place the account on inactive status so that no new additional charges may be added and stipulate that once the balance is paid in full, the account is to be closed completely and forever. Most of the time, these simple requests will be granted immediately; if they are not, contact a supervisor or continue on up the ladder of importance explaining you are going through a divorce unfit proper satisfaction is achieved.

Equity Credit Lines
One particular aspect of joint credit that some people tend to overlook would be an equity credit line. This is an open-ended loan granted by an institution, usually a bank, with your martial property used as the security. The lender places a lien against your home which is recorded on the home’s title and can force the sale of your home to recoup money should you default on your payments. If you are unclear as to whether or not there is such an account open or cannot remember from which institution one was opened, you can contact a title insurance company and ask that a "search" be done on your property. While there is a charge for this search (usually a little over a hundred dollars), the title company will deliver a complete list of liens against your property. If there is found to be such an open account, again, as with other credit lines, contact the institution and ask them to freeze the account. With an equity line of credit left open, you are exposing yourself to the possibility of losing your home.

Security Margin Accounts
A security margin account, available through stock brokerage house, is similar to an equity line of credit. The margin accounts works like an equity line, with your stockholdings acting as the security. Follow the same procedure used for credit cards and equity lines of credit so that your spouse cannot withdraw money, trade stocks, or draw profits without your knowledge.

Safe Deposit Box
There no asset quite like the safe deposit box in terms of its ability to be emptied with little effort. Quite literally, whoever gets there first has the opportunity to grab the contents and run. Banks and other such institutions do not check with the courts to see who is separated and who is not. If a box is cleaned out, there is very little chance that the contents will ever be recovered. The optimum would be to obtain possession of both keys, or, if distrust prevails, to surrender both keys to an officer of the bank. At the very least, try to make and inventory of the box and take photographs of such. Then have an officer of the bank sign your inventory and in that way, if anything is removed, you'll have proof of what was taken. In the event of extreme fear concerning a safe deposit box, obtain a restraining order from the court. The order would prevent either spouse from access to the box until such time as final settlement is reached or the order is rescinded.

Joint Investments or Other Holdings
To thoroughly protect any joint investment or other holdings, make a complete list of all such assets. Promptly contact your broker or other financial officer and inform him of the impending divorce. Request that no stocks or other type holdings should be moved or transferred without the knowledge and written approval of both parties. Immediately send a statement to this effect in writing. Be sure to ask the broker or officer to make a note to the "on line" file on his or her company's computer system as an added safeguard. Given the sophisticated nature of today's markets, many of these types of transactions are conducted over the phone with the push of a button and can be concluded in a matter of minutes, so time is of the essence.

Real Estate Property
Most married couples hold property, specifically real estate property, in a manner known as joint tenancy. Joint tenancy means that when one joint owner passes away, the other owner(s) automatically inherit the deceased's portion of the property without having to travel the long and costly probate process. If you are afraid you might die during the divorce process and do not want your share to automatically revert to your spouse, you can change your title status to reflect tenancy in common. Tenancy in common, like joint tenancy, provides for equal shares, however, if you die, your share will be passed to whomever you've designated in your will or estate planning document. However, in accordance with the laws of most states, if you die and there is no will or estate planning document, your share will pass automatically to your spouse. To formally change the ownership status, you must execute a Deed clearly stating this change. Your spouse does not have to be a party to this Deed for the change to affected, however, the document must be signed in the presence of a notary and recorded in the Office of the Recorder of Deeds where the Deed to the property was originally recorded.