The Financial Effects of the Separation Date
During the divorce process, there are references to three D-Days :
the Date of Marriage, the Date of Separation, and the Date of Divorce. In
reality, with respect to a marriage, the beginning of the end traditionally
comes with the formal Date of Separation (DOS).
Dependent upon the laws of the state in which you reside, the actual Date
of Separation is quite critical and can have a dramatic effect on things such
as credit, pension benefits, and other marital assets. From this date on, you
and your ex-spouse to be are now in limbo both legally and financially, and
will retain such status until such time as the actual Date of Divorce. During
this time period, there is quite literally a potentially large amount of money
at stake, depending upon you and your spouse's particular situation. You may
still be held responsible for any debts incurred by your spouse after the DOS;
the value of a retirement plan or other marital asset such as residential
property can go up or down, often by thousands of dollars, contingent upon the
applicable laws of your home state.
What Determines the Date of Separation?
Exactly what determines the actual Date of Separation varies among the
different states. In some, the DOS is the date you or your spouse actually
physically relocates from the marital place of residence. Others define the DOS
as the date in which the actual divorce papers are filed in a court of law.
Still other states regard the DOS as the date on which one spouse officially
informed the other that they INTEND to file for divorce. In some cases with
regards to the last two situations, a couple may continue to live together even
after the DOS, usually at the behest of financial reality. Therefore, no matter
where you live, it is strongly recommended that you consult with your attorney
as to exactly what laws are applicable to you and your circumstance.
For obvious reasons, each party will attempt to plead their case for the actual
Date of Separation. For example, if you are to be held liable for debts
incurred during the marriage, it is wise to establish the DOS before your
spouse invades the mail with a pocket full of joint credit cards. Or, if a
pension plan is due to receive a large payment in June, perhaps it would be
wise to formally relocate from the place of marital residence in May. Again,
there may be a great deal of money resting on the formal DOS.
Monthly Mortgage and Credit Lines
Generally speaking, you and your spouse will still be held responsible for any
and all debts incurred during the marriage. In other words, the monthly
mortgage statement will continue to arrive even after the DOS. However, to
avoid future problems, it is not a bad idea to close all joint credit lines
upon agreement to formally separate. Or, at the very least, establish which
party will take care of what obligation and formally write each creditor
informing them of your intentions with respect to the outstanding debt. In this
way you will most likely (but not always) protect yourself from any financial
trouble your spouse may get into after the DOS. This may also prove invaluable
as you apply for credit in the future.
Most of the time, with respect to retirement benefits, the actual division of
the retirement account will not come until the actual Date of Divorce. This would
mean that the other spouse would be entitled to any growth monies accumulated
during the period of separation. To fully understand and protect your interest
in any particular pension fund, profit sharing program, or other type of
benefit plan it is suggested that a copy of the benefit brochure issued by the
company or actual retirement plan itself be obtained for scrutiny. One way in
which to achieve this would be to contact the Human Resource Department at you
or your spouse's place of employment.
The Date of Separation can also have a major influence on the decision as to
how to file your Federal Tax Returns. In some states, the income earned by an
individual spouse after the DOS is that spouse's alone and is therefore only
the responsibility of that spouse. This would be an issue that might be best
discussed with a professional accountant.
Businesses and Investments
If you are in a situation where there will be business or investment assets to
be divided, the DOS can have a dramatic impact. Many states will regard the
value of a specific asset as that at the actual time of divorce, as compared to
the date of separation. In other words, if a business value appreciates (gains
in actual fiscal worth) greatly during the period of separation, both spouses
will ultimately be awarded an equal share of that appreciation at the time of
divorce. The same could be said for a stockholding that suddenly skyrockets in
terms of price per share during the separation. Again, it is best to find out
what specific laws apply to your state.
Spousal Support or Alimony
Finally, although, most people are not fully aware of it, the Date of
Separation can affect the court's final decision with respect to alimony
payments. Long-term marriages, usually defined as those lasting ten or more
years from the actual Date of Marriage to the actual Date of Separation, are in
many states analyzed closely. The dominant rationale in these states is that a
nonworking, dependent or lower-wage earning spouse is entitled to alimony for a
longer period of time from the actual Date of Divorce in comparison to a
situation where the couple's marriage was not defined as long-term. Again,
these definitions vary from state to state, but, if you are in a situation
where your marriage is not far off from being classified as long-term, you
might just want to stick it out just a little longer to ensure receipt of a
lengthier period of alimony.