In short, commingling means the combining of separate property with community property. When people divorce, the court divides the community estate. That means, with some exceptions, anything the man and wife have accumulated during their marriage, whether earned or bought by one, the other, or both, is divided in a just and right (or fair) manner. The separate property belongs to one party or the other and does not get divided.
So what happens if the separate estate of one of the spouses becomes commingled with their community estate? The answer depends on just how commingled those assets are. If they are hopelessly commingled – combined to the point that they cannot be realistically separated again – then all of those assets will be considered community property and divided accordingly.
For instance, before the marriage, the wife had a bank account with $100,000.00 in it. After the marriage, she breaks the money into two equal shares of $50,000.00 each. She transfers half of that money to a joint account and she invests the other half, along with some of the parties’ community money.
The money that she put into the joint account was commingled with the couple’s earnings. They paid their house payments, medical bills, utilities, trips, groceries, clothes and a myriad of other things people spend money on to live. The balance of the account rises and falls for several years until they decide to divorce. Has that money been hopelessly commingled? Maybe. If there are bank statements that show all of the activity in the account from the time she deposited the $25,000.00 until the time of divorce, a good family law attorney may be able to sort out the problem relying on statutes, case law and experience. Every case is driven by facts, and unraveling a commingling issue is no less dependent on the facts.
The money that the wife invested through a brokerage account can be even more complex to unwind. Investments in stocks earn dividends (which are community income in most circumstances), they get sold and other stocks or mutual funds get bought, they split two for one, three for one or more, they get turned into cash and put into money market accounts. The list goes on. If things like this have gone on for years during their marriage, it becomes difficult for the untrained observer to identify what, if anything, is left of the investment from the wife’s separate estate. That doesn’t make it impossible, but it does mean that she will need a trained expert – a very good divorce lawyer – to weave their way through all of the transactions.
Not all commingling problems are this complex, but many are far more difficult. We can help you evaluate these issues and develop a strategy for successfully navigating your community and separate property. One of the experienced property division lawyers at Orsinger, Nelson, Downing & Anderson can help you clarify your separate property in court.