Have you ever thought about putting money away in a special account?  A rainy day, “I need to get divorced” fund?  The idea of putting money away in a secret account is not new and there are many reasons people hide money in case of a divorce.  Some people in happy marriages hide money away to give them peace of mind just in case something does happen.  Sometimes, you can tell that things are not going well in the marriage and that a divorce is inevitable so you set money aside for when it happens.  But the question is, is it wise to have a secret fund in case of divorce?

It is important to note that the money being discussed is not to buy an expensive purse or shoes without your spouse knowing about them.  It isn’t even just enough money to get a hotel for a couple days if there is a marital argument.  The money we are discussing is enough that would allow an individual to be able to leave a marriage and/or hire a divorce attorney.

Keeping a secret account may be necessary or appropriate for some people due to their personal situation.  However, keeping a secret account could potentially cause more problems in the long run.  It is important that you consider your personal circumstances and consider the possible consequences prior to hiding money in a secret account.

Taking an Active Role in Finances

Prior to discussing the pros and cons of hiding money in a secret account, let’s talk about another way you can protect yourself financially: take on an active role in the family finances.  One spouse in charge of all the family finances is very typical in families.  The individual in charge of the family finances typically takes care of balancing the bank account, paying bills, and investing.  It is important that if you are the passive spouse in regard to finances, you need to become more involved in the family’s finances.

The following are the first steps in becoming more involved in your family’s finances.  If you are listed as a joint account holder, you need to know about the account and how to access the account.  You need to know about all retirement accounts and how money is invested.  Finally, you should know your spouse’s income, bonuses, and commissions, along with any other business perks like stock options.

The purpose of becoming involved in finances is to make sure that you are not blindsided in the event of a divorce when you are splitting assets.  Imagine thinking that all the family finances are under control, that money is being invested wisely, and that your estate is worth a great deal.  Now imagine going through a divorce only to find out that marital assets are minimal, marital debts are very high, and your estate is close to bankruptcy.  It is never a bad idea to be actively involved in your family finances.

“Spousal Starving” Problem

When thinking about who should consider having a secret account, an individual that does not have any income would be a good example.  A spouse marries at the age of 18, has two children by 21, four children by 25.  She stays at home and raises their four children and then continues to stay home.  Her sole source of income is her spouse’s paycheck because she has never worked.

If the marriage takes a turn for the worst and she needs to leave the marriage or her spouse husband decides to leave her, she would not have any money in order to survive.  Even today, many men and women are stay-at-home parents with no earned income besides their spouse’s paycheck.

Your initial thoughts might be that you can take money out of the joint account.  The money is available to both parties and you are able to take money out of the account at any time.  The problem arises if your spouse cuts off the access to the money, and they could do this at any time.  Your spouse could close the bank account at any time and leave you without any money.  If that happens, it would be a great relief if you had money in a hidden account that you could use.

The term “spousal starving” is when one spouse empties all the bank accounts and leaves their spouse with no money.  Sadly, “spousal starving” happens more than most people would think.  Many people think that their spouse would never leave them without any money but sadly, emotions during the breakup of a marriage make people do things that they would have never done before.  It is not a good idea to assume that your spouse would never act that way.

Alimony

Generally, a spouse that has no income would be considered a dependent spouse and entitled to alimony and post-separation support.  The support you would be entitled to will take time to receive, no matter how your divorce is handled.

Sometimes, alimony is able to be settled in a separation agreement.  But even then, it would take a minimum of a month, but most likely longer, for the attorneys to write up the agreement, negotiate the terms of the agreement, and have everyone sign the agreement.  If you and your spouse are unable to agree on alimony and it needs to go to court, that can also take months.  It can take several months to get a court date but delays can happen, the calendar could be full or your spouse could ask for a continuance to drag out the hearing.

Just because you are entitled to on-going support does not mean that the money will be readily available for you.  What will you do while waiting for the money to become available when you don’t have employment?  Having money to use in this situation would be a benefit to having a secret account.

Emotional Ramifications

Now that we have reviewed some of the situations where it could be beneficial to put away money in case of a divorce, keep in mind that every family’s circumstances are different.  If your spouse finds out that you are putting money away, you would need to consider the possible ramifications.  The first consequence would be that your spouse would be upset that you are hiding money.  If your marriage is happy and you have been putting away money just in case, your spouse could assume that the marriage is not happy, or they would have difficulty trusting you again.  In some relationships, one spouse can have temper issues and finding out that their spouse is hiding money could lead to a violent outburst or domestic violence.

If your spouse does not find the secret fund during the course of the marriage, they will learn about it during the divorce.  Every single asset and debt that is acquired during your marriage will be divided between you and your spouse.  Both you and your spouse will be required to provide information about all financials, this includes retirement accounts and even frequent flyer miles.  If your spouse discovers that you have a secret account that you have been hiding money in during the divorce, it could cause your spouse to have a negative reaction to you.  This could potentially hinder negotiations and settlements because of their feelings about you hiding money.

If you decide to have a secret account, make sure you go through the potential consequences and be prepared to deal with them.  You may also want to consider having a different explanation for the secret account.

Paper Trail

It is important to know that having a secret account is not wrong legally, despite being married.  Married couples are not required to have a joint account and it is not required that one spouse tell their spouse everything regarding their finances, while still married.  Once you start a divorce, full disclosure is required.  It is important that you keep a record of your secret account’s deposits and where that money came from.

If the money you are putting in your secret account came from gifts, you will want to be able to show that your money came from friends or family.  If the money is considered a gift, when dividing property, it would be considered separate property and your spouse would not be entitled to half.  In contrast, if the money in the secret account was earned income by either spouse during the time of the marriage, the money in the account would be marital and it would be divided during the divorce.  No matter where the money comes from, it is extremely important that you keep a record of where the money came from.

Penalties

Another aspect of funding a secret account is being smart about how you fund it.  If you use a 401(k) to fund your secret account, you would be responsible for additional taxes and fees on the money you withdraw.  Many other investments also have penalties and fees attached for taking out money.  Prior to moving money out of an investment, be sure to research what penalties might be attached so that you are not paying more in the long run to finance your secret account.

Should I or Shouldn’t I?

You are probably still wondering if having a secret account in case of a divorce is something you should consider.  Each and every person’s situation is unique and different from everyone else’s.  The pros of a secret account would include that it is a secret that only you know about, you are in control of the account, and you have funds available should you separate or divorce your spouse.  The cons would be dealing with different situations that could come up when your secret account is discovered.

You are the only person that can make the decision about whether having a secret account is something that you need.  If your marriage breaks up and you could be in a situation with no income and no other source of funds, you should have a safety net.  Your safety net could be a secret bank account, a credit card, or another form of money on hand.