Commingling occurs when funds that belonging to one party are mixed with the funds of another party, especially where one party has a responsibility to keep them separate. In the context of marriage and divorce, commingling refers to instances where separate property is mixed with community property, such that the separate property can no longer be distinguished from the communal resources.
Commingling usually occurs when the couple shares a joint account but begins depositing separate resources into the account. It can also occur where the couple has purchased property using a mix of shared and separate monies. In such cases, it can be difficult to trace which funds were used to buy the property, and so there will be issues when attempting to classify the purchased property.
Spouses are not prohibited from commingling funds. In fact, commingling only becomes an issue if the spouses are contemplating divorce. Otherwise, the division of property is not usually an issue for spouses whose marriage is intact and harmonious. Commingling laws may vary from state to state and are usually only applicable in community property states.
Generally speaking, the mere act of commingling assets usually does not change separate property into community property, or vice-versa. Commingling only begins to have legal effects when the separate property can no longer be distinguished from the community property. If this happens, the separate property is “transmuted” or changed into community property (if the couple is in a community property state). Upon divorce, the property will be divided equally between the partners instead of one spouse owning it in full.
In states that follow non-community property laws, the issue of commingling is sometimes not even an issue. In non-community property states, courts do not rely on classifications such as separate or community property when dividing assets in a divorce proceeding. Rather, they will follow principles of equity to determine how property can be fairly divided between the parties. This will usually involve a consideration of several.
Disagreements over commingled funds can largely be avoided through marital agreements between the spouses, such as prenuptial or postnuptial agreement. The couple can state in the agreement how commingled funds are to be dealt with, so long as they are in conformity with the law.
Commingling various properties can lead to confusion in the future should a divorce proceeding become necessary. In this case, you may wish to consult with a divorce lawyer to determine how your assets may have been affected by commingling. It is essential to understand your state’s laws, since divorce and property rules vary by state. An attorney’s advice can be very helpful in this regard.