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Commingled property: A complication for high-asset divorces

On Behalf of | Jul 21, 2022 | Divorce |

Just like no two marriages are the same, neither are any two divorces. Many of the same issues must be dealt with, such as child custody, spousal support and property division, but each of them varies from one couple to the next. For couples with a high net worth, property division is often much more difficult.

General rules of property division

At the outset of every divorce proceeding, the court will seek to classify all of a couple’s assets and debts as either separate property or community property. Any asset which is entirely owned by one spouse is considered separate property and will likely remain with that spouse.

Everything else is community property, meaning that it’s owned by both spouses. Since California is a community property state, each spouse is presumptively entitled to 50% of shared assets and, generally, the court will divide them evenly.

What happens when property is commingled?

Now imagine a situation where one spouse owns their own home prior to the marriage. The spouse sells the home and uses the proceeds for the down payment on a new, marital home. That down payment is separate property. The couple lives in the home throughout their marriage, using marital funds to pay the mortgage. As a result, some percentage of the home’s equity is community property.

The marital home is now commingled property, containing a mixture of both separate and community property. Real estate, bank accounts and virtually any other asset can be commingled, depending upon the circumstances. This situation may be more common among high-asset couples. When assets are mixed like this, it becomes far more difficult to determine who will get what when property is divided during a divorce.