The Financial Effects of the Separation Date
Key Points
  • Dependent upon the state you are divorcing in, the actual Date of Separation can have an effect on credit, debt, pension benefits, and other marital assets.
  • In contested divorce cases with higher net worth, the Date of Separation can be an arguable issue. An early Separation Date versus a later date may be substantially favorable for one spouse versus the other in regards to the value of marital assets and how they would ultimately be divided.

History books refer to June 6, 1944, when the Allied armies landed the largest invasion force ever assembled on the north French coast of Normandy, quite simply as "D-Day". Generally speaking, historians mark this date as the official beginning of the end for Hitler's Nazi Germany. During the divorce process, there are references to three such 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. Not unlike June 6, 1944, its impact is far-reaching.

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.

What Happens to Finances After the Separation Date?

  • Monthly Mortgage & 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 you and your spouse's 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 themselves into after the DOS. This may also prove invaluable as you undoubtedly apply for credit in the future.

  • Retirement Funds:

    Most of the time, with respect to retirement benefits, the actual division of such an 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.

  • Tax Returns:

    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 ultimately be business or investment assets to be divided, again 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 spousal support (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 non-working, dependent or lower-wage earning spouse is entitled to support 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 support.

Useful Online Tools

Suggested Reading
The Property Division Handbook The Property Division Handbook
This book will explain in detail the property distribution aspect of divorce and separation. It will focus on the rights each spouse has under certain laws, situations, and circumstances, and how the division of the property will be decided by the court or through negotiation.

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