Commingling… Say Whattt?!
Scene One: Potential Client Smith enters Divorce Lawyer’s office. Client’s body language shows high level of confidence, a certain “swagger” if you will. Cut to Interior of Conference Room- Lawyer: “What brings you to my office today Mr. Smith?” Client: “I need a divorce. I figure we can get this sucker wrapped up in a week or two. Should be real simple, my old lady and I got all our accounts separate. Always have. She gets what’s hers, I get what’s mine.” Client taps finger on side of head and laughs. Client: “Mama didn’t raise no fool.” Lawyer frowns, looking down at notepad and clears throat: ” Well Mr. Smith, with all due respect, and please know that I am in no way insinuating that you’re a fool, but I just want to ensure you know the law before we get into the specifics of your situation. Have you ever heard the term commingling?”
Scene Two: Client emerges from Lawyer’s office, shoulders slumped, head hung low. Cell phone rings. Client: “Hello? Yeah, just finished up… I’ll be damned Jim, you ever heard of some *%$@ called commingled assets?”
Assets are considered commingled when a single asset or a single account contains marital and non-marital portions.
Usually, commingling assets occurs when a party has a separate account (either pre-marital or containing other non-marital assets) and then deposits marital assets into it as well. The problem is that people are often surprised about what constitutes a marital asset, especially discovering that their income falls into the category. So, that separate pre-marital/non-marital account you’ve been having your boss direct deposit your paychecks into? Womp, womp, womp… yeah, not so separate anymore.
While tracing is an available remedy used to show that the marital and non-marital portions of the asset have separate characteristics, this can often prove to be extremely difficult; especially when the portions are fungible (ie money). It’s also imperative to note if income/profit from non-marital assets has been relied upon by the parties to meet marital expenses, both income/profit and any assets purchased from that income are marital assets subject to equitable distribution. Of course, if you’re of the same persuasion as Potential Client Smith, there are ways to rebut the gift presumption created when assets are commingled. Further, when the assets aren’t fungible or if tracing is plausible (usually with the help of a forensic accountant) it can be shown that the asset maintained it’s separate, non-marital character.
Head spinning? The right divorce attorney can bring clarity and peace of mind when it comes to the commingling of assets and any other family law issue.