What does commingling assets mean?
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What does commingling assets mean?

On Behalf of | Nov 13, 2023 | Property Division |

When couples get divorced, there can be some discussion about whether assets are separate assets or marital assets. Separate assets are not subject to property division. But marital assets are both owned by both people and so both spouses retain an interest in them. While couples can negotiate any kind of property division agreement they like, in the event of a litigated divorce, marital assets must be divided equitably.

Commingling is what happens when separate assets are mixed in ways that allow both spouses to have an interest in them. Doing so can actually change the status of the asset. If separate assets are made available to both spouses after they are placed in a joint bank account, for example, they may then become marital assets. This can lead to some confusion during a divorce because someone may not realize that an asset that they considered to be a personal separate asset is actually now a marital asset that they may have to split with their spouse.

Comingling may affect the status of an inheritance

One of the best examples of this is an inheritance. As a general rule, when an inheritance is given to one person, it is classified as a separate asset. This is true even if that person is already married. Other assets gained or acquired during marriage – such as income – qualify as marital assets. But an inheritance does not start this way unless it has been specifically gifted to a couple, not an individual.

What can change the status of the asset is commingling. This can be done if it is shared with one’s spouse. For example, perhaps a married couple used an inheritance to buy a home. That home is then a marital asset that they both own, and the person who initially received the inheritance cannot claim that they own the house exclusively just because their inheritance was used to purchase it.

But there are also cases where a couple’s money is simply combined, such as when an inheritance is deposited in a joint bank account or a shared investment portfolio. If the money is in a bank account, both spouses may have access to it and they may even use it during the marriage to pay the bills, buy other assets, etc. Commingling an inheritance in this way could mean that the remaining value has to be divided in the event of a litigated divorce, rather than just going to one person.

A complex financial process

This is one of the ways that financial issues can become fairly complex during a divorce. It’s critical that couples understand all of their legal rights by seeking legal guidance as proactively as possible. This is especially true if concerns or questions about important matters arise.