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Debt and estate plans must also be addressed in property division

| Feb 6, 2015 | Property Division

Although a significant number of couples in Colorado choose to maintain separate finances and bank accounts, a great many married couples still choose to combine every aspect of their lives — including their bank accounts. There is nothing inherently wrong with either choice. However, joint accounts, estate plans and even retirement funds may need extra attention and consideration during property division in the event of a divorce.

When breaking out of a marriage and back into single life, a carefully executed divorce agreement is the first step. However, what is outlined in that agreement may not necessarily trump what is written on another legally binding document. For instance, even if you get divorced, if you included a health care power of attorney for your ex-spouse in your estate plan, he or she could still have the final say over your care if the need arises.

Even debt is not excluded from this issue. During asset division, debts, such as credit cards and loans, must be split equitably between the two parties according to whatever is considered fair for their situation. Even if the divorce agreement says the credit card bill is your ex-spouse’s responsibility, if he or she fails to pay, the creditors can come after you if your name remains on the account.

If possible, divorcing couples in Colorado can contact creditors to see if one person’s name can be removed from an account, leaving only the individual who has agreed to pay the debt listed as the account’s owner. This is not always possible, so it is especially important to pay careful attention to who is responsible for which debts during property division. Although there is nothing wrong with mingling accounts and finances during a marriage, those ready to divorce should be sure that they fully understand their finances and the possible impact divorces could have on their estate plans.

Source: Forbes, “Divorce and Your Money Life“, Michael F. Kay, Feb. 3, 2015