What happens when assets commingle?

On Behalf of | Dec 13, 2021 | Property Division

When a couple in California divorces one of the biggest issues that they must face is who gets to keep the family home, the cars, the furniture and other meaningful assets. Who gets what in the property division process generally depends on whether the assets at issue are community property, separate property or property that has commingled.

What is community property?

California is a community property state. Community property is everything that the spouses own together and was obtained during the course of the marriage. Spouses have an equal ownership interest in community property. This includes not just physical assets but also income earned during the marriage and items purchased with that income. There are some exceptions to the community property rule. Gifts made to one spouse only and an inheritance to one spouse only are not considered community property even if they were obtained while the couple was married.

What is separate property?

Separate property belongs to one spouse only and is excluded from the marital estate. Separate property includes anything a spouse owned prior to marriage. Property purchased with separate property and money earned from separate property generally remains separate property, unless commingling has occurred.

What is commingling?

Sometimes property that was separate loses its separate nature and becomes community property. This process is known as “commingling.” Commingling generally occurs when a piece of separate property is maintained using community funds or is sold and the proceeds placed in community bank account or used to purchase community property. Generally, if you can no longer untangle what is separate and what is community in a piece of property it will have commingled. Commingled property is considered community property.

Understanding whether property is community or separate is essential to ensuring the property division process in a divorce is fair. California couples planning to divorce should make sure they have a good grasp on property division so they can make decisions that are in their best interests.

 

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