Legally Untangling Comingled Property
Property division can be a highly contested area in a California divorce and can lead to costly litigation, especially in a high asset divorce. The distinction between community property and separate property is fairly easy to determine, but when community and separate property are mixed or comingled, this can lead to conflict and confusion when it comes time to divide assets. Understanding how to untangle these finances is critical in ensuring a fair division of assets.
When people get married, the assets that they own at the time of the marriage are considered separate property, which makes sense as it was earned and acquired before marriage. Similarly, inheritances and gifts to them generally retain a separate property characteristic. If property is improved during marriage or payments on separate property debts, typically mortgages, are made during marriage, then the community is essentially buying an interest in the separate property. Separate property can be sold during marriage and the funds used to purchase other property. The more comingled the asset the more complicated the process of dividing it. This is when record keeping and a “tracing” becomes extremely important. Retirement accounts are an asset that commonly have a mix of separate property and community property. We use specialist to trace these assets to ensure the division is fair for both parties and complies with California law.
Dividing comingled assets is a commonly disputed issue in a divorce. The disagreement is generally over how much of the asset is separate vs. community. Tracing the separate property portion can be complicated and requires a very clear financial record. The longer the time period for the tracing, the more difficult it becomes.
We use financial experts to assist in this aspect of the division of property. Generally, the use of experts helps parties reduce expenses because the tracing is clearly outlined. As the saying goes, “numbers don’t lie.”
Families tend to focus on custody and visitation and support early in the divorce proceeding but property division should not be delayed too long. This can be a lengthy process and the final division will greatly impact everyone’s life after the divorce, especially the children. Using professionals early on in your case generally saves you money in the long run.
Go in Peace.
Amy