NEW YORK (MainStreet) — When you're married and you need to split up your finances, things might be painful. At least they're straightforward, however: you either reach a mutual agreement through lawyers or, more likely, you get a court-mandated division of your assets. When you're just living together without nuptial attachment, however, things can be a lot more complicated. There's not a clear way to divide up what belongs to you and what belongs to your now ex-partner. Here are some tips and strategies for getting things untangled when you decide it's time to break up.
Protect Yourself Up Front
Helene Taylor has been a divorce attorney in California for 20 years. She generally refers to herself as a "divorce strategist" and stresses that she wants to make divorces go more smoothly but also make marriages better and improve lives in the here and now. She's also a veteran of dividing up property with an unmarried couple, something that she had to do with a house when her and a former partner split up.
Her solution? Her partner and she got a property pre-nup, something that she thinks that unmarried couples should do for major purchases. "If you don't live in a common law state you might get dragged into civil court," she explains. A property pre-nup for major purchases, however, allows you to at least figure out how major assets like cars, homes or even pets will be dealt with in the untimely event of a breakup.
Maintain Financial Independence
Julie Murphy Casserly, a certified financial planner and author of The Emotion Behind Money (Beyond Your Wildest Dreams, 2008) is a strong advocate of keeping your finances separate until marriage. "You should each keep a separate account, as well as an operating account for the household," she says. In the event that you do purchase property together, she advises you to treat it like a business arrangement, complete with a buy-sell agreement.
The problem with joining accounts before you're married? Casserly points out that when you have merged accounts with someone, you each have equal access to the money, as well as equal legal right to it. This means that in the event of a breakup, your ex-partner can drain the account, either out of spite or sheerly because he or she needs the money. It might not sound like a very cool move, but it is totally legal. "Legally you both have 50/50 ownership of the accounts, no matter what," says Casserly.
Breaking Up Is Hard to Do
Protecting yourself up front is great, but what if you failed to do that? What then? Taylor advises you to be as businesslike and unemotional as you can about dividing up any joint assets, including what's in the bank account. "Problems come up when people can't agree on who owns what," she says. She advises to look at it this way: who needs something more and who can afford to own and maintain a specific piece of property? In particular, the latter question can really make things simple. If you both own a car together, but one of you can't even afford the insurance, it's pretty easy to allocate the car.
Money is a difficult sticking point. Taylor says that people should go back and see who deposited what, or even see who paid more bills and explore the possibility that that person can be reimbursed. "Regardless of what you decide, you need to have the conversation about dividing up the money with as little emotion as possible," Taylor said.
Casserly agrees. "The emotional component is what gets people into trouble," she says. This underscores the need for taking care of these concerns long before you and your significant other even think of breaking up. "It might be a pain to take care of your finances together up front, but it's definitely going to safeguard you if the two of you ever part ways," she says.
The best way to deal with things is to go to a financial planner, a lawyer or even a couples counselor. This can help you to plan for the worst while hoping for the best on the front end. In the event that you two do break up and haven't done this, seeking an outsider's opinion is a great way to help make sure that cooler heads prevail.
--Written by Nicholas Pell for MainStreet