Community assets are assets that are acquired during the marriage while separate assets are those acquired prior to marriage or after separation. This sounds simple in theory, but property division often becomes much more complicated due to the concept of comingling.
Comingling occurs when a separate asset mixes, or comingles, with a community asset. When this happens, the separate asset becomes a community asset and is now subject to division.
A common scenario involves a spouse using money in a separate bank account as a down payment on a marital home. Because money from the separate account has now mixed with a community asset, the home, the separate account is now treated as a community asset, even if it remains only in one spouse’s name.
Proving an asset is separate requires tracing
As you can imagine, the concept of comingling means that proving an asset remains a separate asset can be challenging. If you want to prove that an asset is a separate asset, you must trace the origin of the asset back to the start and show that at no point did it comingle with any marital assets.
Tracing assets becomes especially complicated in high-asset divorces involving various types of property, including real property, bank accounts and a range of investment accounts.
Your testimony alone is generally not enough to prove a separate asset. Disputes over community and separate assets often require the use of financial experts, such as forensic accountants, to testify about the asset tracing.
Even expert testimony is not always enough. It helps to have all documentation related to the separate assets ready to present. This documentation should go back as far as possible, ideally to the dates you acquired the separate assets.
Ways to avoid comingling
If you are worried about losing or splitting assets in a divorce due to comingling, there are some steps you can take. A pre-nuptial agreement can spell out what assets you and your spouse agree are community assets versus separate and how the community assets will be split.
There is a good chance you are reading this when you are already married and a pre-nuptial agreement is not an option. A post-nuptial agreement can accomplish the same goal.
Without the benefit of a pre- or post-nuptial agreement, you can avoid comingling by making sure that any money or property you wish to keep separate does not mix with any marital asset. Collect documentation for each separate asset and have it ready if you must one day prove it is separate property in a divorce proceeding.