During divorce, your date of separation determines how assets and debts are divided. Learn more about how this date impacts divorce financial planning from an EP Wealth advisor. Advisors available nationwide.
What is the Significance of a Date of Separation?
Couples going through a divorce may not realize how important the date of separation is. In terms of the divorce timeline, the official date of separation plays a critical role in how assets and debts are divided.
Think of the date of separation as a metaphorical “line in the sand.” Everything earned or acquired before that date is considered community property. Once you step over that line, anything earned or acquired is separate property.
The same applies to debts as well. If you accumulate debts after the date of separation, it’s likely your responsibility to pay them off.
The financial planning process during a divorce depends a lot on the date of separation. Let’s review how this date is determined.
How to Determine the Date of Separation
The date of separation looks different for each couple. It can be the date a spouse moves out, the time a couple stopped acting like spouses, or the day either spouse first took legal or financial actions to end the marriage.
Believe it or not, the date of separation can be a highly-contested issue with divorcing couples. That’s because it’s often subjective. One spouse might consider it the day their ex contacted an attorney, while the other thinks otherwise because they continued living in the same home as a married couple for several more months.
Both parties must agree on the official date of separation to move forward with the division of assets. I’ve seen couples who cannot agree take their case to the courts. When this happens, a judge hears both sides and reviews their documentation before determining the final date of separation.
The Fiduciary Duty Remains After the Date of Separation
Now, even after the date of separation is established, both parties still have a fiduciary responsibility to maintain community property assets until the couple is officially divorced.
I recently worked with a couple where one spouse made a substantial withdrawal from a joint account immediately following the separation. There’s a misconception that you become financially “invisible” once you’re separated, but that’s not the case—although that would be a cool superpower to have!
In California, where I’m based, the spouse initiating the divorce files an Automatic Temporary Restraining Order or ATROS. It contains a few provisions, one of which prevents both parties from transferring, concealing, or disposing of property without the written consent of the other until the divorce is final.
This protects marital assets until they can be distributed according to the terms of the divorce agreement.
Does My Separation Date Matter?
The date of separation may not be as critical for couples with relatively simple financials. They may not have any major income changes or new debts affected by the separation date. It becomes more important when significant income or debt fluctuations are involved.
For example, some retirement plans have safe harbor contributions where the employer makes a large contribution, typically around tax filing time. If the couple separates after that contribution, then those funds are considered community property.
If they separate before the contribution, the funds are separate and stay with the account holder. When we’re talking about several thousands of dollars, you can see how the date of separation becomes quite important.
Part of my role as a divorce financial planner is to help couples determine if the date of separation has major ramifications and to explain how that timing can impact the division of certain assets. With this information, couples may be more willing to agree on that date to help move divorce proceedings forward.
Explore our website to learn more about financial planning during divorce, or find an EP Wealth advisor near you.
DISCLOSURES
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. Content does not involve the rendering of personalized investment advice, nor is it intended to supplement professional individualized advice.
- As the author of this piece, EP Wealth Advisors, LLC (“EPWA”) has tailored the messaging of this article to align with the categories, services, qualifications, capabilities and services that it offers and can service. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions with the appropriate professionals. EPWA makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. All expressions of opinion by the author are subject to change without notice.
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- The Certified Divorce Financial Analyst® (“CDFA®”) that are employed by EP Wealth Advisors, LLC are not practicing attorney, accountant, tax professional, or legal expert. All assessments and subsequent recommendations limited and are performed exclusively under the guise of financial planning. An attorney must be retained in order to professional and accurately assess legal options and/or to provide counsel. We also recommend consulting a CPA, accountant, or tax professional.
- Hiring or working with a CDFA® does not guarantee or ensure that a client or prospective client will experience encouraging or favorable results.
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment, tax, or legal advice nor is it intended to supplement professional individualized advice by the appropriate professional(s).
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