Bank Accounts, Bills And Insurance … Leave Them At Your Peril On Separation?

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Separating from your other half is not only emotionally difficult but it can also make you feel overwhelmed with the minefield of “housekeeping” issues that will inevitably crop up.

It is by no means uncommon for couples to operate joint bank accounts, have joint utility accounts and hold joint insurance policies which may have to be dealt with immediately upon separation.

Whilst it is always advisable to seek legal advice in relation to such issues, it is important for both parties to initially discuss what will happen with these outgoings early on and how they will be managed, at least in the immediate future.

Joint Bank Accounts

Just because you are separating does not mean that you have to suddenly stop using your joint bank account.

In fact, it can sometimes be much easier for you to continue to use it (at least in the interim) if certain expenses are being paid from it, such as a mortgage, school fees and household bills.

It is, however, always advisable to agree the extent of your use of any joint account until a financial settlement is reached.

If your salary is, for example, being paid into a joint account, you may well be better off re-directing it to a sole account, subject to any agreement you may have reached with your spouse, if there is a risk the funds will be siphoned off and used by one party for their own needs to the detriment of the other.

Whilst there is an argument that the “status quo” should continue wherever possible, it is accepted that each separation is going to be different and the needs/circumstances of each party will vary from case to case.

If you are worried about your estranged husband or wife withdrawing funds held in a joint account, then you should notify the bank immediately and ask for the account to be frozen. This will, however, prevent both of you from using the account altogether.

If you do go down this route, be mindful of direct debits bouncing back or bills which are usually paid from this account being returned unpaid.

All bank balances will usually form part of the matrimonial pot of assets and therefore, if you have concerns that your spouse is about to dispose of funds (whether held in a joint bank account or otherwise), seek legal advice immediately.

In such scenarios, time is of the essence in order to obtain some form of preventative order from the Courts and so you will need to move quickly.

Household Bills

If the bills are registered in joint names, then the starting point will be that you are jointly and severally liable for them even if you are no longer living together and regardless of the extent of your interest in the property.

If it is established early on who will continue to live in the property, it may be that the bills can be transferred into the resident party’s sole name.

If, however, it is not yet determined who will remain in the property or whether the property should be sold, the practicalities of transferring the bills (if required) can also be dealt with in any financial settlement agreement.

Particular attention should be given to council tax – if one party remains in the property and is the only eligible adult, then the party in occupation should contact their local authority to potentially claim a concession on the rates.

Insurance Policies

If you and your spouse hold joint insurance policies, then you should decide if they are to be transferred into one name or if they should be cancelled altogether. Much will depend on the type of policy you hold.

There are many types of policies out there including home, life and medical insurance.

Some may have a surrender value and maturity date which should be ascertained early on. Typically, there is no rush to deal with insurance policies and what will happen with them can, once again, be dealt with during the financial settlement negotiations.

Credit & Store Accounts

As far as the lender is concerned, you will not be liable for your spouse’s credit or store cards if they are registered in individual names, however, it is important to bear in mind that within “financial remedy” proceedings/negotiations (usually the substantive part of the divorce process), your spouse may argue that the debts are joint if they were incurred for joint benefit purposes, such as a family holiday.

If you have a credit or store card and your spouse has a second card attached to the account for their own use, then the lender may still consider you liable for your spouse’s spending as well as your own (on a joint and several basis).

If you are therefore concerned about the spending on the secondary cardholder account(s), you would typically be best advised to cancel the facility as any frivolous and/or unsanctioned spending may detrimentally impact upon your credit rating.

It would, however, be sensible to speak to your spouse before cancelling the card just in case it is their only source of meeting their needs. Before making any sudden decisions, seek specialist legal and financial advice to ensure that you are making the correct move.

Conduct can be a factor which comes into play during the divorce process so whether you are thinking about cancelling a household bill account, insurance policy or a credit/store card that is needed to meet your spouse’s needs or have withdrawn funds from a joint account in anticipation of divorce, the act of wilfully creating debt can be frowned upon by the Courts who can impose financial penalties (including costs orders or “add-backs” – a form of credit which is hypothetically added back to the matrimonial pot and offset against a party’s general entitlement) against the perpetrator.

At Seth Lovis & Co, we pride ourselves on getting to the heart of your case as early as possible. We offer pragmatic and bespoke advice to find the right outcome for you. Please contact us today for a free initial consultation on (020) 7404 6565 or email: wnichols@sethlovis.co.uk

PHOTO CREDIT: PICKAWOOD

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