Divorce can be wrenching, infuriating, frightening . . . and it can also be exhilarating, liberating or an honest-to-goodness relief! Emotionally, divorce is different for everyone, but financially, most women have to face similar challenges. Chief among them is the simple truth that divorce is expensive. A solid professional divorce team includes, at minimum, an attorney, a divorce financial professional and a therapist. These are professions that bill by the hour, and your time with each could be significant. On top of that, you may need a vocational expert, a forensic accountant, a real estate appraiser and/or other specialists.
Of course, all those needs are above and beyond your ongoing household and life expenditures. It doesn’t matter how much you have to pay your lawyer – you still need to buy groceries, right?
Figuring out how you are going to pay for things until your divorce settlement is finalized isn’t easy, especially if your husband has already transferred funds out of your joint accounts and/or cut off your access to those funds and credit cards. Even affluent women can have a hard time securing funds to get by while their divorce is pending if they don’t have access to those funds. That’s why if you’re about to file for divorce (or you think your husband might be), it’s important to plan for your immediate and short-term financial needs.
During your marriage, you and your husband likely had one or more joint accounts from which household bills were paid. Once one of you files for divorce, an Automatic Temporary Restraining Order (ATRO) can prevent either party from transferring the funds out of the accounts (provided you notify your bank, brokerage company, etc. and give them a copy of the ATRO). Even with an ATRO in place, you are allowed to pay for normal household expenses and for your divorce related expenses. (For more information, see my article describing what you need to know about ATROs.)
However, serious problems can arise if your husband transfers all or most of the money prior to an ATRO being in place. That’s why you may want to withdraw money from joint accounts before he does, and set it aside for your own needs. But ...
- When, and how much, should you withdraw? If you have a joint account worth $500,000, can you withdraw $250,000, on the basis that you expect to be entitled to half the value of the account eventually anyway?
- What if there are marital assets worth, say, $1M, in accounts you can’t access – can you then take the entire $500K from the joint account you do have access to?
- What can you do if you have limited funds, and can’t access any of your marital assets?
These are complicated questions, and I asked respected family law attorneys across the nation for their opinions.
“I typically advise clients to speak with their spouse about closing the account and equally dividing the monies,” she told me. “If that is not possible and they cannot communicate with their spouse, they should take no more than 50% of the money. The reason for this is that usually they will be entitled to no less than this amount in the divorce. I don’t advise a client to take any more than 50% even if the spouse has additional funds solely in his name because this just usually leads to a money grab on his part which, in the long run, can make the divorce even more complex,” she explains. “If a client needs additional monies to fund the litigation, I would advise that she petition the court and get them by way of court order.”
Laura A. Wasser, Partner in the Los Angeles firm of Wasser, Cooperman & Carter and author of It Doesn’t Have to Be That Way: How to Divorce Without Destroying Your Family or Bankrupting Yourself (whose client list includes Maria Shriver, Heidi Klum, Angelina Jolie, Christina Aguilera, Britney Spears and many others), advises caution. She acknowledges that funds can be withdrawn prior to the filing and service of a petition for divorce, but considers it risky.
“This could very well start the case off in the wrong way, as husband would feel that she was divorce planning and seek vengeance,” Wasser said. “I generally recommend an advance distribution of funds at the outset of a case if my client feels that maintaining expenses will be difficult during the pendency of the proceeding. Obviously a lot depends on the parties and their respective personalities.”
Bari Z. Weinberger, owner of the New Jersey firm Weinberger Law Group, LLC, generally does not recommend her clients withdraw any money from joint accounts.
“Inevitably, even if the client is acting merely to safeguard some funds for security purposes, the other spouse will interpret it as an initiative to liquidate and dissipate assets and act in kind. Then the game playing begins,” she explained. “Before you know it, both parties are tapping into every resource they can find, hiding money and jewelry, removing items from the home and what started out as a simple plan to protect a joint account has spiraled way out of control. Litigation will erupt and the parties will spend mountains of money on their lawyers to have to deal it through the courts, likely branding both parties as manipulators to the judge.”
Like Brandt, Weinberger prefers to communicate from the beginning. “Discuss with the other party the desire to each have access to joint funds and to split certain assets,” she said. “If the other side refuses, there is always the option of asking the judge to allow freedom and access to certain accounts throughout the pending litigation so that one side does not have the upper hand in maintaining control of all of the finances. Judges appreciate this method and approach as opposed to the former. I absolutely believe that both parties should be on an equal playing field throughout the case. However, it is imperative to be forward thinking and proceed with caution before recommending certain courses of action to a client that could create an unnecessary level of fear and suspicion in the other party, thereby spawning a nightmare of events for your client whose only goal was some peace of mind and security.”
Marilyn B. Chinitz, a Partner at the New York law firm Blank Rome LLP whose clients include Michael Douglas and Tom Cruise, sees it differently.
“Clients have a right to one-half of the value of the jointly titled funds and should access those monies to secure funds should they later be closed out of accounts held by the other spouse,” she said. “If there is one joint account and the monied spouse has multiple accounts in their sole name to which the non-monied spouse has no access, it may be appropriate for the non-monied spouse to secure as much money as they can to ensure that they are not left out in the cold.”
Chinitz cautions that in New York, any such withdrawals can only be done before legal action has formally begun, because a New York summons contains automatic restrictions on transferring assets.
“Prior to any divorce papers being filed, you can withdraw any amount you’d like… However, after the divorce papers are filed, certain restraining orders kick into place,” Chang said.
As to how much to withdraw, she notes that “technically, if it’s community [property], then you can withdraw up to 50%… the problem is, the other spouse may have reimbursement claims, etc., and because there is a restraining order, you may run into problems if you have a vindictive ex.”
According to Chicago attorney Debra DiMaggio, Principal of the Law Offices of Debra DiMaggio, if a withdrawal could itself spur divorce proceedings, she’d advise against it.
“On the other hand, if the divorce was inevitable and the couple would most likely have been engaged in a difficult and acrimonious divorce anyway, then the answer is, ‘Yes.’”
In that case, DiMaggio continued, “a rule of reason has to prevail with the funds earmarked to pay an attorney retainer and pay routine bills until a temporary court order can be secured. I’d rarely recommend withdrawing 50% of the account balance. The account balance might be temporarily inflated in anticipation of paying property taxes or income taxes and a withdrawal of half might divest the ability to pay.”
It’s clear that there are many factors to consider in making the decision to withdraw from joint accounts, and that close consultation with an attorney familiar with the particulars of your case is an absolute necessity.
I suggest you take all of these different perspectives into account and if you have already retained a divorce attorney, then discuss these issues with him/her and follow their advice. However, I’ve seen far too many cases in which the wife, hoping for a non-contentious divorce, tries the “communicate first” approach in good faith, only to find her husband has already cleaned out all their accounts (or did so shortly after their “amicable” conversation) and left her without funds. I’ve seen narcissistic and/or abusive husbands empty joint accounts and then do everything possible to drive up the wife’s legal costs so that she quickly runs out of money. Yes, these concerns can be addressed in court, but unfortunately, even retaining an attorney to file the necessary motion for a court order can be a prohibitive expense for a woman whose husband has cleaned out the joint accounts ahead of her.
I advise my clients to Think Financially, Not Emotionally®, and take what measures they can to protect themselves. Withdrawing funds from joint accounts (unless and until restricted by an ATRO) definitely falls in that category.
Jeffrey Landers is a member of the DailyWorth Connect program. Read more about the program here.