Dividing assets during divorce can be confusing, especially when separate and marital property get mixed up. Tracing commingled assets is important for spouses to gain rightful ownership of their separate property. Here’s what to know about tracing commingled assets in a California divorce.
Courts treat commingled assets as marital property, so it is important for spouses to “trace” their contribution in order to prove separate ownership of marital property. Courts use two types of tracing to unmix commingled assets: direct tracing and family expense tracing.
Commingled Assets
Assets become commingled when a spouse’s separate property is combined with their partner’s separate property or with marital property. Marital property mixed with separate property is commingled. For example, if one spouse uses their own funds to acquire a jointly owned asset, that asset is commingled. Similarly, if one spouse uses joint funds to acquire a separate property, that separate property is commingled.
Why is Commingling Important?
During the divorce process, all property is presumed to be jointly owned marital property. All property and assets in the divorce will be divided equally under this presumption. However, a spouse is able to “trace” their own separate funds in a commingled asset and prove that some of the funds are their own separate property. Commingling overcomes the presumption that all assets are jointly owned and allows spouses to claim rightful ownership of their own property during divorce.
If the court is unable to unmix the commingled assets, the assets will be treated as marital property.
Related: How to Protect Your Assets in a California Divorce
How to Trace Commingled Assets
California divorce courts have two ways of tracing separate property in commingled assets: direct tracing and family expense tracing.
Direct Tracing
With direct tracing, the court uses documents and records to determine the separate property in a commingled asset. The records must prove the exact amount of separately owned funds in a commingled asset in order to clearly ascertain how to separate the assets.
For example, a bank statement showing that a real estate property purchased during the marriage was paid for by a spouse’s separate funds will directly trace the asset ownership.
Family Expense Tracing
Family expense tracing takes the place of direct tracing when documents and records are not available. With family expense tracing, the court assumes that family expenses are paid from commingled marital funds. If the marital expenses out of a commingled fund are more than the marital deposits, the excess is separate property.
For example, Morgan and Jesse share a commingled bank account. Morgan has a separate fund that deposits $1,000 each month into the account, and Morgan and Jessie jointly deposit $3,000 into the account. Since separate and joint assets are mixed in the account, the account becomes commingled. The family’s expenses are $3,500 each month. The joint expenses of the commingled fund exceed the joint deposit amounts. The remaining $500 in the account each month is attributed to Morgan’s separate fund. During the divorce, Morgan’s total separate assets in the commingled fund are calculated by $500 for every month of the marriage.
Related: How to Divide Property in a California Divorce
FAQs About Tracing Commingled Assets in California Divorces
What are commingled assets?
Commingled assets are assets that have combined separate and marital funds. Marital assets mixed with separate assets become commingled. Understanding commingled assets is important during the divorce process in order to clearly “trace” separate ownership of assets to be reimbursed accordingly.
How do I trace commingled assets?
Courts trace commingled assets with two methods: direct tracing or family expense tracing. Direct tracing uses records and documents to clearly determine each spouse’s rightful claim over an asset. When direct tracing is not possible, courts turn to family expense tracing. Family expense tracing calculates a spouse’s contribution of surplus funds into marital funds. The surplus is then calculated and returned to the spouse.
Contact Her Lawyer
If you or a loved one need to trace commingled assets in a California divorce, get your free consultation with one of our California Divorce Property Division Attorneys in California today!