How to Handle Money When Married, But Living Apart


Dear To Her Credit,

My husband and I currently reside in Washington State. I plan on moving to Virginia in the near future. We plan on remaining married, but living separately. How do I protect myself from liability (i.e. debt and taxes) incurred by my spouse after we no longer live together?

- Marissa

Dear Marissa,

The answer to your question depends on the reasons you are planning to live apart.

Many married people live separately by choice or necessity. In fact, there's a whole movement called Living Apart Together (LAT), whose premise is based on that couples don't have to live together to stay together, according to Deana Arnett of Financial Planning Services in Virginia.

Other people in perfectly solid marriages are forced to live apart; for instance if one spouse is in the military or has some other job that causes them to move. They still plan a future together, and they may still have a joint checking account and pool their income and expenses.

There's no need to change anything in the financial realm if the only change is to your address, as long as both parties have a high level of trust. Because you are asking about your liability for his bills and taxes, however, this doesn't seem to be the case. You may even be taking the first step to end the marriage.

Arnett says, "If this is an actual trial separation, I would go into full-on protective mode. I would make sure there are no joint accounts. I would close down any accounts we have together and make sure he is not an authorized user on my accounts. I may even be tempted to file separate taxes."

Filing separately for tax purposes is not ideal because, as Arnett notes, you lose certain deductions when you use the Married Filing Separately filing status. However, if you have any inkling that your husband may have questionable dealings with the IRS, such as unreported income or unpaid taxes, you are far better off giving up the advantages of filing jointly and keeping your name off his tax return.

Filing separately is one option to ensure you're not tied to him financially, says Arnett. "If I found out my husband had not reported income, I would file for 'innocent spouse relief.'" That's a provision by the IRS that absolves you of responsibility in certain cases if you can show you should not be responsible for misstatements or unpaid taxes on a joint tax return. Never sign a joint return you have questions about, assuming you can always get innocent spouse relief later, however. "It's a pretty hard thing to prove, and a pretty hard thing to get," Arnett says. Without innocent spouse relief, you could be on the hook for paying the entire tax bill if you husband doesn't.

The IRS offers an online form to help you determine whether you're eligible for innocent spouse relief.

Community property and community debt laws are another issue to consider. He lives in a community property state (Washington), but you are moving to a non-community property state (Virginia). His creditors could very well pursue you for the debts based on community property laws. Whether they would win in court is debatable, but why let it go that far?

Closing joint accounts and filing separate tax returns are important steps, but they only go so far. No matter how careful you are, the longer you live apart, the more risk you put yourself in. When you live together, you generally see what the other person is spending money on and any bills that come to the house. With a spouse on the other side of the country, an unaccountable husband could let someone move in and support her, start businesses that fail, incur medical expenses or be sued. He could even file for bankruptcy and drag you into the mess.

Whatever your reasons for not filing for divorce, I recommend you talk to an attorney as soon as possible. Don't expect living in another state to protect you. You may need to get a legal separation, at least, to keep you safe from your husband's financial shenanigans.

Good luck on your move, and take care of your own finances and your credit.