Understanding Commingled Property in Divorce

Understanding Commingled Property in Divorce

When two spouses get divorced they have to divide the property they own. There are two types of property that spouses can own: community property and separate property. Community property is any property that is not separate property (see full definition).

What is Commingling?

Commingling is mixing, in this context when separate property gets mixed with community estate. For example, a wife has $45,000 in an account before marriage. During the marriage her husband puts $45,000 of his pay into that account. The account earns $10,000 in interest during the marriage. What of the $100,000 is community property vs. separate property? The answer is probably $45,000 to the wife as her separate property, and $55,000 to the community estate to be divided in a ‘fair and just’ manner between them.

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 answer to this question will probably require hiring a CPA to trace the history of each transaction. This can get very complex very quickly.

Property Has Been 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 may not be sufficient to trace separate property.  See, e.g., Graves v. Tomlinson, 329 S.W.3d 128, 139 (Tex. App.—Houston [14th Dist.] 2010, pet. denied).  “[T]he clear and convincing standard is not satisfied by testimony that property possessed at the time [of divorce] is separate property [if] that testimony is contradicted or unsupported by documentary evidence tracing the asserted separate nature of the property.”  Id.

If a spouse cannot clearly identify his or her separate property amongst the community property, all the property will be treated as community property.  Tarver v. Tarver, 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. Contact our team today if you’re ready to discuss your case or check out more of our Property Division Resources.