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Commingled Assets – What Happens When You Combine Separate Property With Marital Property?

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The division of property is a common concern for many going through divorce. While a court can easily identify some items as marital or non-marital property, others can be more difficult to classify. Commingled assets occur when separate property or funds are “mixed in” with marital funds. This mixing then creates difficulties for a Court when determining what is separate property and what is marital property.

What Happens When Separate Property Becomes Commingled?

Separate property, otherwise known as non-marital property, will vary based on the state. In Illinois, examples of non-marital property include:

  • Property acquired before the marriage (with exception to retirement plans, depending on when contributions were made)
  • Gifted or inherited property
  • Property protected by a valid prenuptial or postnuptial agreement

On the other hand, assets purchased after marriage and with marital funds are considered marital property.

Separate property becomes commingled when one or both spouses use martial funds to contribute, improve, maintain or pay off the asset. Because both parties have money invested in the property, it no longer belongs to just one spouse. Additionally, investments or bank accounts owned by one spouse prior to a marriage can also become commingled. In this case, one or both spouses may contribute marital funds to those assets during the marriage.

Examples of Commingled Assets

The most common instance of commingling occurs with real estate, particularly homes. If an individual owns a home before marriage and then sells it, the money from the sale of that home remains “separate property.” Until or unless that money is then used to buy the couple a new home, it will remain separate property. When this happens, the money from the sale of the first home is no longer “separate property.” Once it is used to purchase a marital asset, especially if the couple uses some marital funds for a down payment as well.

Other examples of commingled assets may include:

An inheritance that is deposited into a shared bank account

This occurs frequently, and it’s always important to speak with an attorney if you are expecting an inheritance. Getting legal advice on how to avoid comingling could significantly streamline the identification of your non-marital property should a divorce occur.

Any form of property purchased using income or resources from both spouses

Assets purchased with “non marital” funds become commingled, especially if they are titled in joint names or purchased during the marriage.

Investments that are comprised of contributions from before the marriage and after the marriage

Investment accounts often count money invested together as one unit. If you have money that you contributed to that account before the marriage, and then also after the marriage, those “separate” and “marital” funds are all invested together. It then become very difficult to determine how much of the gains are attributable to the marital funds or the non-marital funds.

Factors Used By The Court

Because commingled property is difficult to distinguish, a judge takes several factors into consideration when dividing it among spouses.

  • Prenuptial agreements or lack thereof
  • Money or property contributed by each party to the acquisition of the asset
  • Length of the marriage
  • Age and health of each spouse
  • Occupations and earnings of the spouses
  • Any arrangements for children

How To Prevent Commingling of Assets

The best way to prevent commingling is to get a prenuptial agreement. Prenuptial agreements are a great way to eliminate questions surrounding property and debt in the event of a divorce. In addition, they can also save litigants time and money.

If you did not get a prenuptial agreement, there is no reason to fret. There are still options available. Along with getting a postnuptial agreement, many suggest that spouses do the following:

  • Avoid using marital funds to pay off separate property, debts or home mortgages
  • Avoid using separate funds to pay off marital property or debt
  • Discuss all major purchases prior to buying
  • Keep updated and accurate records of purchases to prove funds came from separate accounts
  • Speak with an experienced attorney if you’re expecting an inheritance

A Trusted Attorney Can Help You Take Back Your Commingled Assets

No one goes into a marriage with divorce in mind. Unfortunately, it does happen. Too often, added financial concerns from commingled property catch many couples off guard. In these situations, legal guidance from a skilled attorney can make all the difference. Kristen Strieker is an experienced divorce attorney with knowledge of Illinois property laws. Kristen and her team can help alleviate the stress of your divorce and fight for what is rightfully yours. Contact our office to learn more.