Understanding asset commingling and why to avoid it

You might be certain that a piece of real estate you purchased in South Carolina before you got married cannot be divided with the rest of your marital property in a divorce. Still, there is a chance a judge may state otherwise. The problem is that some spouses engage in commingling without realizing it, which can subject their property to division even if they believe it is still separate property.

Commingling, as explained by Marketwatch, is when separate assets are mixed in with marital assets. In the process, the separate assets generally become marital assets as well. The most direct example many couples may think of is when a husband or wife deposits money that they personally owned into a bank account that is jointly owned by the couple. The personal money in this instance will likely be considered marital property.

Some instances of commingling are not as well known. A spouse may own a piece of real estate or a vehicle before getting married and may use marital funds to improve or repair their personal property. However, using marital money to increase the value of separate property or to transform or maintain it is considered commingling and can subject the property to division in divorce.

Some comingling takes place by letting one spouse make management decisions of an account owned by the other spouse. This can be a surprise to many people since no money actually gets commingled, yet if one spouse manages a bank account that is owned by the other spouse, the account can be considered marital property and could be divided along with other marital assets.

As previously explained, marital funds may be used to improve or change a piece of separate property and increase its value. Per FindLaw, while a piece of separate property that increases in value may be considered marital property, it depends upon how active the appreciation is. If separate property appreciates with no active involvement from a spouse and the appreciation is attributed to inflation or accumulation of interest, the property might escape a designation of marital property.