Separate property is everything you acquired before you married your spouse, but it also includes assets you received during the marriage by inheritance, survivorship or gift. Marital property is everything you and your spouse earned and acquired during the marriage. Marital property can include real estate, income, business profits, retirement contributions, vehicles and all other items either spouse purchased or earned. In most instances, the name on the title is irrelevant.
Commingling is when you mix separate property with marital property. It can happen in many ways, including by using shared assets to improve or maintain a spouse’s separate property.
What happens to commingled assets in a divorce?
Once you have comingled your assets, it can be challenging to determine the boundaries of ownership. Under Virginia law, when spouses have hopelessly commingle marital and separate property by using one category to contribute to the other, the contributed property loses its identity and becomes marital property. One example is when you own a home separately but use marital funds to renovate the structure or pay the mortgage.
All marital property is subject to the equitable property distribution process in a divorce unless you can retrace its original identity and prove it is separate property through a preponderance of evidence. This presumption will not work if you gifted the property to your spouse.
How can you avoid problems with commingled assets in a divorce?
The easiest way is to avoid combining your separate and marital assets. However, commingling is unavoidable in many long-term marriages involving several valuable assets. You can always create a prenuptial agreement or even a marital agreement that can predetermine how you and your spouse will divide all or some your assets in the event of a divorce.
The most important and proactive thing you can do is to keep paperwork. Proper documentation can help you retrace separate assets and keep what is yours. Do not rely on the financial institution for maintaining those records because they often retain records for only 5 years, and with consolidation, mergers, and data breaches, many institutions lose the ability to retrieve the past statements.