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The financial impact of divorce on: co-mingled assets

Oct 26, 2021 | Property Division

We have been exploring some of the specific ways divorce affects individuals financially. In this post, we will look at co-mingled assets.

Co-mingled assets refer to property or money that was separate when individuals acquired it but became marital property during a marriage. Considering the unique nature of these properties, they can spark conflicts and confusion when spouses divorce.

Why classification is crucial

During your divorce, you will divide property into one of two categories: property that is eligible for division and property that stays with one person.

Under Texas community property laws, property possessed by either person at the time of divorce is presumed to be community property and, therefore, eligible for division.

However, parties do not divide separate property. This includes property a person had before marriage or gifts or inheritances acquired by one person during the marriage.

With that in mind, separate property can become community property through co-mingling. This can happen in several ways. Someone might mix separate funds into a marital account or use marital funds to pay off, maintain or improve separate property.

Because property status affects whether parties divide or keep it in a divorce, correctly classifying assets is crucial.

Classifying assets through tracing

Asset tracing involves examining an asset to classify it using one of several methods. While these methods are complicated, parties can generally expect tracing to investigate:

  • The source of the money
  • When and where a person deposited the money
  • How parties spent that money
  • Titles
  • Property values
  • How much parties spent out of a co-mingled account

Understand that you are not required to handle asset classification and tracing yourself. Often, divorcing spouses retain the services of attorneys and financial professionals to investigate these complex economic situations.

Can you prevent co-mingling?

If you wish to avoid the complications that come with co-mingling assets, you have options to do so. 

One option is to sign a prenuptial or postnuptial agreement identifying separate property. Another option is to keep separate accounts.

Co-mingling assets is a complicated but not uncommon situation for Sugar Land couples. While managing these issues in a divorce can seem overwhelming, this information can help you make informed decisions to protect yourself and your finances.