What You Need to Know about Commingled Assets in Divorce
The term “commingled assets” refers to property that was once separate or individual but has become mixed during marriage. It could be a savings account you had before tying the knot that both of you contributed to after marriage or a house bought with both separate and marital funds.
In divorce, the division of these assets can pose a complex puzzle, often leading to confusion and conflict. But armed with knowledge and guided by legal expertise, you can navigate this tricky terrain with more confidence.
What are commingled assets?
Separate property refers to anything you owned before the marriage or acquired during the marriage through inheritance or personal gift. Marital property is any asset a couple obtains during their marriage.
Now, let's explore how separate property can become commingled:
- Real estate: Suppose you owned a home prior to your marriage. If marital funds (like income from both spouses) were used to pay the mortgage or make improvements, the house becomes a commingled asset.
- Bank accounts: If you had a savings account before the marriage and after getting married, and both of you deposited money into it, that account is now commingled.
- Retirement funds: Let's say you had a retirement account before marriage. If contributions were made to this account during the marriage from either spouse's earnings, it has become a commingled asset.
- Investments: Investments can also become commingled. If separate property was used to purchase an investment and then marital funds were used to enhance that investment, it becomes commingled.
The above examples illustrate how easily separate assets can become part of the marital property. The challenge lies in untangling the web during divorce proceedings. It's crucial to approach this process with a clear understanding and the right legal support.
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How to differentiate between separate and marital property
Let's start with the presumption of marital property. This is the legal assumption that any property acquired during the marriage belongs to both spouses.
Burden of proof
If you wish to claim a certain asset as separate, the burden of proof falls on you. You have to demonstrate convincingly that the asset in question was acquired before the marriage or through inheritance or gift during the marriage.
Tracing
This is where tracing comes into play. Tracing is tracking an asset from its origin to its current state. For instance, if you bought a car with money from a savings account you had before the marriage, you would need to trace the funds used for that purchase back to your original account to prove the car is a separate property.
Forensic accounting
Forensic accounting might be necessary when dealing with more complex financial situations. This involves a detailed investigation of financial records to uncover and trace assets, especially when one spouse suspects the other of hiding assets.
For dividing property, different states follow different rules. In community property states like California, assets and debts amassed during the marriage are considered equally owned by both spouses. Hence, they're split 50/50 upon divorce.
Most states follow the principle of equitable distribution, where marital property is divided in a manner deemed fair but not necessarily equal. Factors like earning potential, the amount of time the couple was together, and the lifestyle standard during the marriage are considered.
Why detailed record-keeping matters
Consider this scenario: You purchased a piece of art during your marriage using money from an inheritance you received before you got hitched. To prove this artwork is your separate property, you need to show clear records – bank statements, withdrawal slips, receipts – tracing the funds from your inheritance to the purchase.
Or perhaps you owned a home before marriage, but you used marital funds for renovations. Keeping track of mortgage payments and renovation costs can help determine how much of the house is separate property and how much is marital.
We understand that diving into the world of legalities and financial complexities can be overwhelming. That's where we step in. At Hello Divorce, our mediation services and legal coaching services help you navigate these choppy waters. We guide you, ensuring you clearly understand your rights and obligations.
Our online divorce plans offer a roadmap through the process, with resources and tools tailored to your unique situation. We're here to make divorce less intimidating and more accessible, one step at a time.
