How Legal Separation Affects Finances and Property in Michigan
When your marriage is not working, but you’re not ready to call it quits, legal separation is an option. This allows couples to get some space, think things over, and live separately without immediately ending their marriage.
But separating your lives does not automatically separate your finances. So, how does legal separation affect finances and property in Michigan?
Here is what you will want to know before taking that next step in your marriage.
What Is Legal Separation?
Michigan does not use the term “legal separation” like other states. Instead, these legal options are called separate maintenance.
Separate maintenance gives couples a chance to live apart. And during this time, the court will address many of the same issues that come up in a divorce. This can include:
- Property and debt division
- Spousal support
- Child custody, parenting time, and support
However, unlike a divorce, you are still married. This option is for people who aren’t ready to end their marriage permanently but need a formal legal arrangement to live separately.
What Happens to Your Property?
For divorces, Michigan follows the principle of equitable distribution. This isn’t a “divide everything down the middle” process. In these cases, the circumstances of the marriage are considered when deciding how to split marital property. That can include:
- Homes
- Vehicles
- Bank accounts
- Investments
- Retirement accounts
- Businesses
Property ownership can get complicated. During this time, you will want to look at the entire financial picture of your marriage.
What Happens to the House?
The family home can be one of the hardest parts of a separation. You may need to address who will live in the home, who will make the mortgage payments, who pays utilities and other expenses, and what happens to the property.
Depending on the circumstances, there are several options. This could include:
- Selling the home
- One spouse buys out the other’s interest
- Continuing to own the property under an agreed arrangement
What About the Debts?
Credit cards, mortgages, vehicle loans, personal loans, medical bills, and other debts may all need to be addressed during a separation. Keep in mind that an agreement between spouses does not change your agreement with a creditor.
For example, if both spouses are jointly responsible for a credit card, you might agree that your spouse will make all the payments. That agreement does not prevent the credit card company from pursuing you if the account isn’t paid.
What About Bank Accounts?
During a separation, you may be tempted to close joint accounts, move money, open new accounts, or make other changes. But making major moves without knowing the potential legal consequences can create additional problems.
Before making big changes, make sure to get copies of your financial records, including bank statements, tax returns, retirement account statements, investment information, mortgage documents, and credit card statements.
This can help you get a better picture of what you and your spouse own, what you owe, and where the money is going.
Think About Retirement Accounts
Retirement accounts can be easy to overlook. However, those accounts can represent a big portion of a couple’s financial assets. Pensions, 401(k)s, IRAs, and other retirement benefits will need to be evaluated to see whether any portion is marital property.
Get a Better Picture Before Deciding to Separate
Legal separation can give you breathing room, but it does not mean you can put your finances on pause. Your home, accounts, debts, retirement benefits, and other property still need attention.
Now that you understand how legal separation affects finances and property in Michigan, you can take the next steps.
If you’re considering legal separation in Michigan, the Law Office of Melissa M. Pearce can help you with those next steps. Reach out to schedule a consultation so we can discuss your situation.