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Separate Bank Accounts in Marriage

One of the questions newly wedded couples are confronted with is whether to have a joint account or separate bank accounts in marriage. Many financial professionals have advised couples to keep money in separate accounts. But why is it so? As the union grows and as time is passing, each partner is likely to bring considerable income or debt into the marriage.

We are going to discuss in details the merits and demerits of having separate accounts in marriage and if it is a good idea.

Are Separate Bank Accounts Marital Property?

Yes. In most states, money in separate accounts is considered marital property. So are the other properties acquired during a marriage. However, some states have equitable-distribution laws. These laws recognize the spouse who earned property during the marriage as the rightful owner.

However, it doesn’t mean it is useless to have a separate checking account. Having separate bank accounts when married can give you easy access to your money unlike in a joint account where one partner can limit your access to joint funds. This normally happens during a divorce.

Should Spouses have Separate Accounts in Marriage?

Marriage life is complicated and for many reasons, couples should maintain separate bank accounts. Having separate bank accounts when married gives you financial independence and empowers you financially. The following are some of the reasons why you need to consider separate bank accounts in marriage.

Also read: How to open US business bank account.

Benefits of Separate Bank Accounts in Marriage

Having separate bank accounts when married has the following benefits for an individual:

1. Financial independence. Having separate bank accounts when married gives you financial independence in that you can use your hard-earned money as you wish.

2. Your spouse's debts doesn’t affect your finances. In case your spouse has debts like student loans and credit card debts, or child support, a separate bank account shelves you from such liabilities.

3. A spouse’s poor credit score doesn’t affect yours. If your partner has poor credit scores, it doesn’t affect yours and you can borrow a loan against your account.

4. You can spend according to your temperament. No one wants to be scolded about how to spend their hard-earned money. A separate bank account gives you the freedom to spend as you wish.  

Demerits of Marriage Separate Bank Accounts

1. Complex when paying marital expenses. It becomes challenging to split marital expenses when both partners have separate bank accounts.

2. Requires a lot of communication. You need to communicate a lot with your partner about your financial goals and habits when you hold separate bank accounts.

How to Be Financially Secure in Case of a Divorce

Having a separate bank account when married does not give you financial security in case of a divorce. If you are looking for financial security in case of a divorce, you may need to consider a prenup. A prenuptial agreement is a contract created by a couple before marriage listing properties each one of them owns. It also states each partner’s property rights in case of a divorce.

A prenup is essential when you want to:

  • Avoid arguments in case of a divorce
  • Get protection from your partner’s debts
  • Clarify financial rights
  • Pass property to children from prior marriages

Joint Bank Accounts in Marriage

Some couples prefer to have joint bank accounts in marriage. In the case of a divorce, both parties have an equal claim to a joint bank account regardless of who deposits or withdraws more.

Having joint accounts when married also has its merits and demerits.

Also read: How to achieve financial independence in 5 years.

Merits of a Joint Bank Account in Marriage

  • Promotes transparency. Spending habits are transparent to both partners.
  • Promotes teamwork. Both spouses are entitled to contribute to the joint account thus promoting teamwork.
  • Easy to pay marital expenses. It becomes easy to pay for marital expenses such as mortgage and insurance. 
  • Accountability. It is easy to know how much each spouse has saved and how much each has spent.

Demerits of Joint Account in Marriage

  • No independence. You may feel as if you have lost your financial independence by sharing an account with your partner.
  • Complicated division. In case of a divorce, it becomes challenging to split or divide funds in a joint account between partners.
  • One partner can withdraw all the funds invested together in a joint account. Besides, one partner can also limit access of the other partner to a joint account.
  • It exemplifies one's spending habits. Having a joint account in marriage means that both partners can see the spending habits of each other.

How to Separate Joint Bank Accounts

If you already have a joint bank account with your spouse, it is possible to split it so that each one has a separate bank account. To separate joint bank accounts, you need to:

1. Call the bank and ask them to split the account. The bank will request you and your partner to close the joint account and then each one of you to open a separate personal account.

2. Wait for joint account transactions to clear. It is possible to close a joint account with pending transactions. However, you must clear all fees for debit and checks after the account was closed.

3. Withdraw money from a joint account and share it with your partner. You need to withdraw money in the joint account and share it between yourself and your spouse.

4. Apply for a new separate personal bank account. Each one of you needs to apply for a personal account in your name.

Summary of Marriage Separate Bank Accounts

Lately, many couples are opting to have separate bank accounts. Although separate bank accounts are considered marital property, they are easier to manage personal finances. However, if you are looking for financial security in case of a divorce, separate bank accounts won’t help you. You may need to consider entering into a prenuptial agreement with your partner before marriage.

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