Should You Stash Some Secret Cash in a Rainy Day Tennessee Divorce Fund?
What would you say to stashing some secret cash in a rainy day divorce fund? That is, just as a way to hedge your bet on the outside chance your marriage ends up on the rocks in a stormy Tennessee divorce.
Setting up a rainy day divorce fund can be a good idea when done properly. Jeff Landers (divorce financial strategist and Forbes contributor) had an interesting take on the question of a secret stash in his Pros and Cons of Keeping a Secret Fund in Case You Divorce.
Landers ponders the circumstances wherein the career woman brings significant assets to the marriage. A prenuptial agreement before the marriage is one way to protect separate property, or perhaps a postnuptial agreement after the marriage. But she could also set up an account in her name only and fund it exclusively with her separate cash, for example a portion of her pre-marital earnings or an inheritance. (Careful, the separate account must never be transmuted into or commingled with marital property!) Although his article focuses primarily on the woman’s financial independence, any man could take the same approach to safeguarding his separate cash in the event of divorce. You know, just in case things don’t work out so well…
How much to place in that rainy day divorce fund is another question entirely. As Landers aptly notes, “it depends” largely on who you are divorcing.
What’s Not a Proper Rainy Day Divorce Fund?
When a Tennessee divorce is filed, an automatic (mandatory) injunction goes into effect restricting many of the parties’ activities. In part, the injunction prohibits the spouses from “transferring, assigning, borrowing against, concealing… dissipating or disposing… of any marital property” without a court order or without the other party’s consent. T.C.A. § 36-4-106(d)(1)(A).
Was the rainy day divorce fund proper or does it violate the mandatory injunction? There is a line which cannot be crossed. On the one hand, if the rainy day fund was created after the divorce was filed and represents concealed marital cash in the possession of one spouse to be hidden from the other, then there may be a violation of the divorce injunction. Secreting marital assets to prevent them from being included in the property settlement would not be looked upon favorably by the Tennessee family court. Doing so crosses the line.
On the other hand, if the rainy day fund is pure, separate property without transmutation or commingling with marital assets, then the fact that it was secreted from the other spouse is unlikely to violate the injunction.
Get Advice from a Memphis TN Divorce Attorney
The existence of the secretly separate account is something to be disclosed during the discovery process in every Tennessee divorce. Consequently, the other party could learn of its existence soon enough. When the rainy day divorce fund is a proper one, and absent countervailing circumstances, in most cases the stash of secret cash will be allocated as separate property in the divorce. Every case is unique, however, so always check with a lawyer first.
Property divisions can be very complex and locating hidden marital assets a real challenge. Memphis divorce attorney, Miles Mason, Sr., CPA, is a prolific author and national speaker on divorce and family law issues, presenting seminars to other attorneys, forensic accountants, and business valuation experts. He practices family law exclusively and is founder of the Miles Mason Family Law Group, PLC. To schedule your confidential consultation, call us today at (901) 683-1850.
Before you go, check out The Tennessee Divorce Client’s Handbook: What Every Divorcing Spouse Needs to Know, currently available on Amazon and Kindle.
