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In practically any marriage, one or both spouses have money or other assets before they get married. Savings and other bank accounts are good examples. And, in practically every marriage, one or both spouses earn or acquire more money and assets, like when both spouses work and earn paychecks.
When it comes to divorce and dividing the couple’s property, there’s often a problem with how to treat the property each one had before the marriage, especially when the money or assets have been “commingled.”
Mixing and then Separating
“Commingling” happens when one spouse’s separate property (property the spouse had before the marriage) is mixed or combined with the other spouse’s separate property or mixed with the couple’s marital property (property earned or acquired during the marriage).
For example, when you take money that belongs to you, like in a checking account, and add it to a bank account holding money belonging to you and your spouse, the money is commingled.
Sorting It Out
When it comes to dividing the property in your divorce, the only way you can claim the money you put into the bank account as your separate property (so your spouse won’t get a share of that money) is to “trace” or follow the funds back to you. You’ll need detailed records – deposit and withdrawal slips, bank statements, etc. – to show how much of the money is actually yours.
State Laws Impact the Money
When it comes to property division, some states follow equitable distribution rules while other states follow community property rules. The laws in your state will impact if and how you can keep your separate property.
Equitable Distribution States
In equitable distribution states, when one spouse’s separate property is commingled or mixed with the other spouse’s property or with marital property, the separate property becomes indistinguishable from the marital property. By commingling, the separate property loses its status as separate property and becomes marital property subject to being equitably divided by the court.
For example, if you put your separate money into a marital checking account, the money is no longer considered your separate property. However, in most states, if you can come up with deposit and withdrawal slips, bank statements and other records to trace your money, it may be set apart and your spouse won’t get a share of it.
Community Property States
In community property states, commingling doesn’t automatically change the separate property into community property. However, commingling raises a presumption that the commingled money is community property – it’s assumed you wanted to share the money because you mixed it with money belonging to you both.
However, in the property division, so long as each portion of the fund remains identifiable, the property will remain either separate or community property. If, however, separate and community property have been so intermingled that it’s impossible to trace to the source property, the whole will be treated as community property.
Purchases. It’s common for one or both spouses to withdraw money from a commingled account and use it to purchase something, like a car or other property. The spouse who claims that the acquired property is separate must prove that separate funds were withdrawn from the account to purchase the property. Otherwise, the property will be considered community property under the rule that property acquired during marriage is presumed to be community property.
Commingling and tracing can get complicated, especially if there’s a lot of money and property involved. Even when there’s not a lot of money at stake, whether you’ll be able to keep your separate property after the divorce may have a big impact your post-divorce finances and budget. An attorney can help make sure you get everything you’re entitled to.
Questions for Your Attorney
- Can a prenuptial or postnuptial agreement protect my separate property?
- How can I change our joint bank account into separate accounts?
- My soon-to-be ex has all of our bank account statements and records. How do I prove that money that I deposited in a joint checking account is my separate property?