Some married couples enjoy living together while keeping their financial assets separate. Separate ownership of assets can be advantageous in some instances, but oftentimes loving couples misunderstand the results of holding separate assets. The Wall Street Journal recently highlighted four potential pitfalls for couples maintaining separate accounts:
- The assets are not necessarily separate under Nevada law.
Simply having your name on an account does not mean the account is yours alone. Under Nevada law, pursuant to community property principles, all of your earnings and wages after marriage are the property of both parties. This is true even if you have your paycheck deposited into a separate account.
Nevada inheritance laws can surprise couples. If you die without a will and leave a surviving spouse, no children and surviving parents, your parents are entitled to a portion of your estate. Many spouses intend for their entire estate to go to a surviving spouse. However, unless that desire is set forth in a will or trust, the state may direct otherwise.
- Separate accounts most often mean lack of communication.
Communication between spouses is critical. Many spouses have separate retirement accounts and manage those accounts in isolation. This isolated planning can undermine the couple’s financial objectives and their combined risk tolerance. Regularly, I meet with clients where both spouses are unaware of accounts or policies that one spouse possesses. These omissions could cause the account proceeds to go missing or remain unclaimed for long periods of time.
In addition, holding similar investments in two separate accounts can be more costly. Combining the separate holdings may result in lower advisory fees.
- Separately-owned property may be at greater risk in bankruptcy or a lawsuit.
Nevada has very liberal exemptions for bankruptcy purposes. These protections can be utilized best by conferring with an attorney who focuses on asset protection planning.
Joint ownership can make your assets less appealing to creditors. Creditors loathe joint assets in which they will hold only a one-half interest. Separately-owned property is less-protected from creditors. The home is the primary asset to hold jointly or through a trust.
- Separate accounts are more difficult to administer.
The death of a loved one causes plenty of heartache. Maintaining separate account causes needless headaches too. The time delay in accessing separately-owned accounts can lead to draining financial stress. Many financial institutions demand formal court orders before allowing access to financial accounts, even when such orders are not necessary. At a minimum, couples should maintain a joint checking or savings account to make sure the day-to-day expenses can be satisfied.