Joint Bank Accounts and Separation

It is fairly common for couples in marriages and de facto relationships to share at least one joint bank account. Consequently, a pressing issue when a couple separates is often how to manage this joint asset. In such cases, there are steps that the parties can take immediately to protect their interests, and then more long-term arrangements that can be put in place as part of an overall property division. This article looks at what happens to joint bank accounts in a separation, the legal implications, and the practical steps to take to protect each person’s financial interests.

Joint bank accounts

A joint bank account is a financial account that is shared between two people, typically spouses or family members. Such an account will normally permit both people to deposit, withdraw and manage funds for the account. Joint bank accounts allow both parties to easily contribute to the joint expenses of a shared life. In Australia, partners commonly use joint bank accounts for mortgage repayments, childcare costs, and other shared financial responsibilities. While joint accounts can simplify a couple’s financial arrangements, they can also pose a problem if the couple separates.

Ownership of joint accounts

Legally, joint bank accounts are the property of both account holders, which means that both parties have equal rights to the total funds, regardless of who contributed more to the balance. However, the legal ownership of a joint bank account can be adjusted as part of a family law property division.

Under the Family Law Act 1975, separating couples are entitled to a fair and equitable division of the total asset pool, which includes all bank accounts. It is important to note that fair and equitable does not necessarily mean equal. The court will often order unequal distributions of property based on factors such as each person’s contributions to the asset pool (through financial and non-financial contributions), as well as each person’s future needs.

Because of the court’s focus on fairness, if one party acts unfairly over a joint bank account, (such as by unilaterally draining the account),  the Federal Circuit and Family Court of Australia (the court) or the Family Court of Western Australia will typically adjust the division of other assets to compensate their former spouse.

A family law property settlement can be arranged privately between the parties, through mediation, or with the court’s assistance. However, it would be unreasonable to expect anyone to wait for a full property settlement to access the funds in a joint account. The parties are likely to need access to these funds to meet their daily living expenses. In a best-case scenario, the couple can agree on how to handle the funds in joint accounts, even if they are unable to agree on the division of other assets such as the family home or superannuation accounts. It is best to document the terms of any agreement in writing to prevent misunderstandings or disputes in future.

In some cases, the parties are unwilling to reach an amicable agreement about any joint resources. In fact, when a separation is acrimonious, draining a joint bank account can be an opening shot in an ongoing battle. In those cases, it is not uncommon for one spouse to deliberately withdraw funds to place the other party at a financial disadvantage. When someone is afraid of this type of scenario, they can take steps to protect their interests by:

• monitoring the joint account for suspicious transactions;
• asking the bank to freeze the joint account, which prevents either party from withdrawing any funds without the other party’s consent. Many financial institutions will freeze a joint account upon request. This approach protects the balance of funds in the account until the parties reach a mutual agreement or the court issues an order on the matter;
• seeking an interim court order to freeze the account if the bank has not been able or willing to do so. The court is likely to issue such orders if there is evidence that one party is likely to act to the financial detriment of the other. This can protect the couple’s assets until they reach a full financial settlement.
• asking the court for an order to close the joint account and transfer the balance to a trust account held by a solicitor for one of the parties, pending the outcome of the property settlement.  

Handling a joint bank account after separation can be fraught with challenges, especially if the ending of the relationship was acrimonious. Separating couples should always obtain financial and taxation advice about managing joint bank accounts. It is also essential to seek legal advice for guidance on protecting assets, negotiating a fair settlement, and pursuing legal remedy if a spouse acts improperly with joint funds. Contact Go To Court on 1300 636 846 for any advice on this or any other legal matter.