Right before a divorce is filed, parties are usually in a hurry to try and protect their assets from a possible distribution at the time of a divorce. Sometimes this is done in a clearly bad-faith manner, such as transferring money to a sister or girlfriend’s account. However, other times, the parties are not aware that certain transfers/gifts, such as the transfer of an account to a child either of or outside of the marriage, are considered dissipation of the marital estate that must be considered as part of the division of assets.
A typical example is the transfer of an asset to that child, such as a savings account, CD, money market account, car purchases, or actual cash funds to a child. The issue does not usually become contested for children that are of the marriage as the award can be counted as part of child support or college contribution. However, for children that are outside of the marriage, a court may consider the transfer as dissipation and may award the other party a portion of the amount that was transferred.
An important point to realize, however, is if this money was in fact marital to begin with, or if marital money was added during the marriage. If the funds that were used were acquired prior to the marriage or through a non-marital source, then the court will not consider the transfer as dissipation. However, if the funds were acquired prior to the marriage, but income acquired during the marriage was used to fund the account, then 50% of the amount contributed would be considered the other party’s contribution amount. This can be problematic for larger contributions if the funds given to a child have already been used or cannot be returned to the parent.
If you are concerned about a certain savings account that was being held for the benefit of the children but were not under the children’s name, contact an attorney first about the best way to preserve these funds from being distributed at the divorce. For one, your spouse may agree to leave the funds to the children. Secondly, you may be better off using these funds to pay off your debts, which will free up money to re-fund the savings account. Before you actually transfer these accounts, it is important to be fully advised of the consequences. If you have already transferred or gifted accounts to your children, it is important to disclose it in Court than to hide it and face possible sanctions.