What Do You Do if Separate Property Has Been Mixed / Commingled ?
When two spouses get divorced, a judge is going to divide what property the two parties own. There are two types of property that spouses can own: community property and separate property. Simply put, community property is any property that is not separate property. Tex. Fam. Code § 3.002.
What is Commingling?
Commingling is mixing. It is when separate property gets mixed in with the community estate. Then, you must figure out how to characterize which assets, even the assets that have been commingled.
Often times, this property gets mixed with community property. For example, a spouse may have a bank account with money in it before marriage, but during the marriage, the spouses put community funds in that account. Which funds are community property?
For a more complex example, perhaps a spouse owned stock before marriage, but during that marriage, the stock was put into a brokerage account with community stock, sold, and used to purchase other stock. The level of complexity can range from the very simple to pretty complex.
Property Has Been Mixed/Commingled. Now What?
When separate property and community property have been mixed, or “commingled,”
the spouse claiming separate property will have to “trace”
and clearly identify his or her separate property. Most times, this will
require that the spouse claiming separate property hire a forensic CPA.
Testimony alone will not be sufficient to trace separate property.
394 S.W.2d 780, 783 (Tex. 1965). (“If separate property and community property have been so commingled as to defy resegregation and identification, the burden is not discharged and the statutory presumption that the entire mass is community controls its disposition.”).
Tracing a complex process and must not be treated lightly. It is important to hire a lawyer who has handled cases with both simple and complex tracing. It is also important to hire the right forensic CPA and have a lawyer who is comfortable working with a CPA and presenting forensic testimony in the courtroom.
If you think that you’ve mixed your property with your spouse, be prepared to “retrace your steps” and be ready to gather documentation that may go back years.