Divorce & Your Money Market
Dividing property and debt in a divorce can become a difficult task, especially when one party has amassed a respectable amount of money in a money market account through hard work or thrifty living but now faces the prospect of sharing those savings with a spouse she feels may not deserve it. Like any financial account, a money market account can constitute marital property and thereby fall within the reach of the other spouse.
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Division of Marital Property
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All states divide marital property and debt under a community property or equitable distribution, or ED, scheme. In community property states, family courts divide marital property equally, whereas in ED states they apply a rebuttable presumption that an equal division is fair but can order an unequal distribution based upon the presence of one or more statutory factors. In both jurisdictions, marital property consists of property acquired between the date of marriage and either the date of separation or divorce, depending upon the state. Deposits into a money market account made after the date of separation or divorce can be marital property if the money was earned --- even if it wasn't received --- during the marriage or received in exchange for an item of marital property. This remains true even if the money market account is in the name of only one spouse.
Definition of Separate Property
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Separate property in both ED and community property states encompasses all property owned by either party before the marriage or acquired after the date of separation or divorce. Just as funds in a money market account can constitute marital property if they were earned during the marriage or received in exchange for marital property, money market funds earned before the date of marriage or after the date of separation or divorce or received in exchange for separate property. As separate property isn't property of the marital estate, it's not subject to division by the court. In ED states, however, it can play a role in whether or not a court orders an unequal distribution of marital property and debt.
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Source of Funds and Tracing
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Whether or not the other party in a divorce can get her hands on funds in a money market account depends upon the source of funds deposited into the account. If a party earned the money during marriage or got the money through selling marital property, those funds are divisible by the court regardless of the name on the account. If a party can trace separate property into the account, that portion of it is separate. Money market accounts can constitute mixed assets with both marital and separate components.
Relationship to Other Parts of the Case
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Even if a money market account contains only separate property, it can play an important role in other areas of the case. In addition to influencing the division in an ED proceeding, a court can order a separate money market account transferred to satisfy a distributive award or child or spousal support arrears. Additionally, the court can consider interest income from the account as income for child or spousal support calculation purposes.
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