A Guide To Divorce, Commingled Funds, and Marital Property

A larger and smaller wedding ring on $20 bills.

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All the property you own before getting married is legally referred to as “separate property.” Meaning: It's 100% owned by you. Once you're married, that separate property (say, a home or sizable savings) still remains separate—unless it's “commingled” with any separate property owned by your spouse. Commingling occurs when, for instance, the two of you both start paying the mortgage for your preowned home. At that point, the home becomes "marital property"—property your new spouse will have an interest in if you two end up getting divorced.

At the time of divorce, you'll both be required to divide all marital property and funds used to benefit the marriage (aka commingled funds). The task of dividing property and other assets can be difficult—and conflict-laden—especially if salaries and other funds were combined during the marriage. Divorce settlements often hinge on the extent to which funds were merged, and deciding which property and assets belong to who is often a complex endeavor, especially when large purchases (i.e. homes and automobiles) are paid for with both of your incomes.

Examples Of Marital Property

  • Inherited money that's deposited into a joint account
  • Joint home purchases and/or home maintenance costs
  • Cars, TVs, and all other property purchased via combined resources
  • Investment accounts to which you both contribute
  • Joint checking and savings accounts and/or those in which you both deposit funds
  • Borrowed money that benefitted you, your spouse, and your kids, if applicable (In this case, both spouses must repay the loan unless a settlement is negotiated.)

Record Expenditures

If you don’t keep a detailed accounting of how you've paid for, and what you've spent, on assets acquired during your marriage, it can be tough to prove they weren't purchased with commingled funds should you happen to divorce your spouse. Keep meticulous records of your previously owned assets and whatever you purchase, both together, and separately—even if you're convinced an impending divorce isn't on the horizon. (There's never anything wrong with looking out for number one.)

Ways to Avoid Commingling Funds

Plan ahead and take these precautions while married:

  • Obtain a prenuptial agreement: It should plainly state what property will and will not be considered marital property should you both divorce.
  • Use marital—not separate—property to pay off a marital debt: For instance, if you're gifted a sum of money (gifts are considered separate property), don’t use it to pay joint credit card debt or a mortgage.
  • Keep your name—and yours alone—on any deeds to separate property: And if that separate property ever requires maintenance, use only your income to pay for it. (This is where record-keeping comes in.)
  • Maintain separate bank accounts: Only deposit money into a joint account in order to pay for marital property. (Funds kept in separate accounts usually remain separate property.)
  • Discuss large, impending purchases to determine whether they should be considered marital or separate property: If you both want equal interest in a home, then pool the money to buy it and put both names on the deed and mortgage.
  • Ensure separate property remains separate: Pay for assets with funds withdrawn from an account opened solely in your name—never from a joint bank account. (And keep good records, too: Making payments via check is preferable.)
  • Consult an attorney: Before marriage, speak with a divorce lawyer who is familiar with property laws in your state about what you should do to protect your separate property during the marriage.

Sure, it's tempting to embrace a "what's mine is yours" outlook when the two of you first tie the knot and you're all loved up, but not commingling property and funds is a simple precaution that will pay off—for the both of you—should the walk down the primrose path prove a little less than rosy.

If you, unfortunately, end up getting divorced, then the onus will be on each of you to prove whether your property is yours alone, or if it needs to be divvied up by the court. And unless you’ve kept meticulous records of purchases throughout your marriage (which could be decades), it can be nearly impossible to draw clear lines between you and your spouse's assets once things go south.

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