Good to know: Separate accounts does not mean separate assets
Many Millennials grew up in divorced households, and that has impacted how they approach their own relationships in adulthood. For one, fewer are getting married. Many choose cohabitation ahead of marriage or instead or marriage.
Another noticeable change is how they approach finances and property. Prenuptial agreements are becoming more commonplace (not just among the wealthy), and more Millennial couples are choosing to keep separate bank accounts. The idea is to maintain separate assets just in case the couple gets divorced later on. But while a prenuptial agreement will help achieve that goal, many people fail to realize that separate bank accounts will not.
California is a community property state. That generally means any assets or debts acquired during the marriage are considered jointly owned. Even if an asset belonged to one spouse prior to marriage, it can become community property if it is commingled with other assets or used by both spouses.
In the context of bank accounts, when the money is earned and what the money is used for is more important than where it is kept. Most couples pay bills and buy groceries that benefit the entire household using money earned from their paycheck. If they are depositing money earned during the marriage into a separate account, they are likely commingling assets. If they were ever to divorce, each spouse’s bank accounts would likely be considered community property. However, depending on certain factors, it may be possible to determine if there is left over separate property.
To be sure, there are other good reasons to keep separate accounts. Giving each spouse a discretionary account and paying bills out of a joint account can be a good way for each person to feel like he or she has some autonomy in the marriage. But this strategy will not keep the assets separate in the event of divorce.
If you are considering divorce or would like to discuss the possibility of a prenuptial or post-nuptial agreement, please contact an experienced family law attorney in your area.