If you’re going through a divorce, you may want to hold off on making major purchases until the process is over. Here’s why.
Divorce can be intricate and tricky, especially when it comes to dividing property. Different states handle this part of the process differently.
Can You Make Large Purchases During A Divorce?
When it comes to breaking up assets, Washington, for example, follows a community property model. Resources and debts are split equitably between both parties.
In this situation, you may want to delay any major purchases until you finalize your divorce. Such spending often has a substantial impact on your divorce settlement.
Community Property, Major Purchases, And Divorce
Community property is a fairly straightforward concept. In this model, the state considers all assets acquired during a marriage, even things held in one individual’s name, as the property of both spouses.
In the case of divorce, this means that it can all be divided equitably between both of you.
This doesn’t mean an even split or that everything is doled out 50/50. Ideally, the division will be handled so each party comes out on a relatively even footing.
Spouses work with each other, with mediators, or with the court to agree on how to divvy up the shared assets in a fair and balanced way.
Related Reading: Dividing Debt In Washington State
If You Make A Purchase During Divorce
Divorce comes with many expenses. This includes attorney’s fees, court costs, changes in tax status, and more. Other expenditures also occur.
If you make a big purchase while your divorce is pending, in some circumstances, under community property statutes, this may be included when it comes to the division of property.
Various factors come into play in this ruling, like financing, where the funds to make the purchase originate, and what you buy.
Depending on what you purchase, it may even look bad for you in the eyes of the court. For instance, if you’re fighting over child or spousal support and claim you can’t afford to make payments, buying expensive items raises questions.
Can You Buy A Car During Divorce?
Maybe you need a new car to shuttle the kids around. Or maybe a move results in a longer commute, and you need a vehicle with better gas mileage.
It’s one thing if you upgrade to a safer, more reliable car in which to transport your children or get to work. But if you run out and drop a bunch of money on an unnecessary car, however, you’ll have some explaining to do.
Related Reading: No-Fault Divorce: What It Means For You
If Your Spouse Makes A Purchase During Divorce
Just as any big purchases you make may impact your divorce proceedings, those made by your spouse can have a similar effect.
If your soon-to-be ex-wife claims she needs spousal support, but buys an unnecessary or impractical new car, or something of that ilk, it may reflect poorly on her.
If you worry about your spouse spending communal money on big-ticket items from joint accounts, you may be able to prevent it. In some cases, the court implements a temporary financial restraining order.
While this measure still allows the purchase of normal, regular necessities, more substantial expenditures from shared funds require approval from both parties.
Related Reading: Rebuilding Finances After Divorce
The Impact Of Purchases Made During Divorce
Because Washington is a community property state, the court often considers how purchases were made during the divorce. Where the money comes from also shapes how the court views and classifies purchases.
If you or your spouse use shared funds to pay for an item, it will likely be treated as a community asset and may be considered when the court rules on the distribution of property.
What this usually means is that, if your spouse spends a significant sum on material goods, you will likely be given a larger portion of the remaining assets to offset the new acquisition.
The opposite may be true if you are the one spending money in this fashion.
This is true if a purchase is made with joint funds; if you use separate assets, the court may view the item differently.
For example, if your spouse uses premarital reserves, the court will most likely view this as an independent property.
Similarly, after establishing a date of separation, the law treats each spouse’s income as an individual resource. Any purchases made with that money will likely also be treated as separate.
In Washington, however, the court does have the power and authority to divide such separate property. This occurs when the court seeks a more equitable outcome.
Related Reading: The Average Cost of Divorce in Washington
Financing Purchases During Divorce
Most major purchases are financed. While it looks like your spouse went on a reckless spending spree during your divorce, maybe they didn’t.
Whether or not financed purchases factor into the division of property varies a great deal on a case-by-case basis.
If a down payment came from joint funds, the court will likely consider this when splitting up assets. It may be viewed as pre-divorce property and treated as such.
On the other hand, if that same down payment came from an individual source, that changes things. The court may opt to ignore this and award the item in question, and any future payments, to the purchaser.
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Refinancing and Divorce
It’s always worth noting that divorce does not change any loans or contracts you and your spouse entered into while married.
If you bought a car or house, have regular payments, and both of your names are on the financial documents, the terms still apply equally to both of you. Just because you split up doesn’t automatically alter any preexisting deals.
In the division of property, one party may be ordered to take care of a particular payment. Your name, however, remains on the record.
In situations like this, if your spouse is awarded a house, car, or another high-value item you’re still paying off, your best bet is to have your ex refinance and remove your name. Any missed payments while your name remains on a loan impact you and your credit score. Even if the court orders your ex to make them.
People often include these requirements in the final divorce agreement. Some divorce decrees specify that you or your spouse needs to rework a particular loan by a specific date.
However, don’t take this for granted. Just because the court orders it doesn’t mean your ex will always make payments or refinance loans. If they don’t, it can come back to bite you. This can have a big impact on your finances, so keep an eye out.
Related Reading: Who Pays for College After Divorce?
Understand the Impact
While you will likely need to make some significant purchases during your divorce, it’s important to understand how they may affect the process.
Remember, if you buy something during your divorce, in Washington, there is the possibility of losing it in the distribution of property.
There are ways to ensure that such purchases cause as little havoc as possible. It’s simple, really. Avoid impulse buys, think through spending calmly and logically, and stick to necessities.
If you absolutely must buy a big-ticket item with community funds during the divorce, talk to your attorney or work out a deal with your spouse.
Related Reading: Rebuild Finances and Protecting Your Credit Score During Divorce