In this edition of ‘It depends’, special counsel Craig Turvey talks about whether you should be freezing your joint bank accounts if you have separated from your partner.
Welcome to this week’s edition of It Depends. Today we’ll be talking about if you’ve separated, should you be freezing your joint bank accounts.
Bank accounts and separation
When people separate, one of the most common questions we get is “We have joint bank accounts. What should we do with them?”. They can come in multiple forms, obviously, in the sense that they can be joint accounts in people’s names. It could be a trust bank account, a company’s bank account, et cetera. So, often people will have a lot of money sitting in these accounts that they’ve accumulated during the marriage. And that’s all well and good while they’re together. But once they’ve separated but they haven’t yet finalised their property settlement, there’s always a lot of uncertainty about should I take money out of an account? Should I freeze it? What are the risks? What are the pros and cons of doing either of those things?
Should I freeze the joint bank accounts?
The answer to that is, well, it depends. You can go off and freeze a joint bank account quite easily. If you contact your bank, tell them you’re separated, you want to freeze the account, they will do that quite readily. Or make it a dual signatory account. So, that’s easy to do. But there are consequences for doing it. So, particularly if you haven’t told the other person if they suddenly try and access the account for what might be a reasonable expense and find out that you’re frozen it without telling them, that’s probably going to have some sort of detrimental impact in terms of their ongoing relationship with you. So, there’s always a consequence for what you do. I don’t normally recommend to people that they just go off and freeze accounts unless you’ve got an immediate concern. So, say, for example, the other person has a history of gambling and you’re worried they might withdraw money just to spend it on something or they’ve threatened to take a significant amount of money out of bank accounts. So, they’ve put you on notice that that’s what they intend to do. But again, there are perfectly legitimate reasons for freezing accounts, particularly if you’re in a bad financial spot. So, if you’re for example, you might be a stay at home parent, you don’t have an ongoing source of income.
So, if you’re relying entirely on the other spouse or the other party to support you financially, and you’re worried that if their income keeps coming in and they cut that off, that you’re going to have no access to funds and their behaviour is deteriorating, then that can be a really good example of a time when it might be appropriate to take some money out of the bank accounts for your living expenses and legal fees. So, for example, last week, one of my clients, this is a bit excessive to me, but they had five joint credit cards. I would love to have that many with large balances, but in any event, they had five credit cards. He without notice, cut off four of them. Just paid the cards out, cut them up closed the accounts without telling her. And the fifth card that she was using was almost maxed out. She was very worried from her perspective that he was taking steps to cut her off in terms of access to finances and that she wouldn’t be able to afford anything because she’s not working. She relies entirely on him for financial support. So, he may have no intention of doing that. But from her perspective, all she can see is right. We had five cards. He’s closed, four of them. I’m now down to my last one and I’m worried that’s either going to maxed out and he just won’t pay that out or he’ll close that one as well.
So, from my perspective, and for most clients, I try to encourage them to be open about what they’re intending to do. So, for example, he may have no intention of restricting her access to funds. He might have just as a tidy up exercise, closed the other accounts. But she didn’t know that because he didn’t communicate it to her. So, again, it depends in terms of whether you should freeze a bank account, consider freezing it, talk to the other person about it or not.