Jul 31, 2023

What are Considered “Commingled Assets” in a Maryland Divorce Case?

Jul 31, 2023 - Family Law by |

When spouses mix or blend separate and marital property, making it hard to identify each spouse’s individual assets, this is known as “commingled assets.” Commingled assets add complication to a divorce proceeding, as they may involve complex financial analysis and evaluation in order to ensure equitable property distribution

The state of Maryland follows the principle of equitable distribution during divorce proceedings. This means that when dividing marital property, the court seeks to divide assets and liabilities acquired by the spouses during the marriage in a just and fair way, but not necessarily equal. Marital property typically includes assets and debts brought into the marriage, while separate property normally includes assets owned by each spouse prior to the marriage. Additionally, property and assets acquired by gifts or inheritance are typically considered to be separate property. 

If separate property is mixed with marital property, this results in commingled assets. For example, if one spouse uses money from a premarital bank account to buy a property jointly with the other spouse, this might be considered a commingled asset. 

In determining whether an asset should be considered a “commingled asset,” the courts typically look at the source of the funds and the parties’ intentions. An asset that is determined to be “commingled” is often subject to division as marital property, even if it started as separate property. A Bethesda divorce attorney can help you better understand the concept of commingled assets. 

Examples of Commingled Property

Below are some other scenarios to help illustrate commingled property in a Maryland divorce case:

Business Interests: If one spouse owned a business before marriage and the other spouse actively participated in running and growing the business during the marriage, the increase in the business’s value may be considered marital property, leading to commingling.

Gifted or Inherited Assets: If gifts or inheritances given to one spouse are deposited into a joint account or used for marital purposes, these may be considered commingled assets. 

Joint Bank Accounts: A couple’s joint bank account, where each spouse deposits their earnings, may be considered commingled. 

Real Estate: If one spouse owned real estate before marriage but subsequently added a spouse to the property title, the real estate asset is considered commingled. As a consequence, any increase in the property’s value during the marriage could be subject to division as marital property, even though it was initially separate property.

Investments: If one spouse had investment accounts before marriage and continued contributing to those accounts during the marriage, the increase in value may be considered marital property. This is especially true if the contributions were made using marital funds.

Retirement Funds and Accounts: These types of accounts may be considered commingled if they receive contributions from marital funds during the marriage.

Maryland law allows for tracing commingled assets to their separate property origins. Tracing involves showing the original source and character of the asset before it became commingled. This process is often challenging, especially if the financial records are not well-maintained or if the commingling occurred over an extended period.

If you’re seeking to understand and navigate the intricacies of commingled assets in your Maryland divorce, it’s crucial to seek the advice of an expert who can help you identify, value, and trace commingled assets and advocate for a fair and favorable distribution. These steps are critical in evaluating commingled assets in Maryland:

Identification: The first step in the property division process is to identify all the assets and debts of both spouses. This includes identifying any commingled assets and understanding how they were intermingled.

Valuation: The valuation of the assets must be determined when they are identified. This may be done through financial assessment, appraisals, or expert testimony. 

Tracing: For commingled assets, the court will conduct tracing to determine the portion of the asset that is attributable to separate property and the portion that qualifies as marital property. Tracing can involve examining financial records, bank statements, and other relevant documentation.

Experts, such as forensic accountants and appraisers, will likely be necessary to analyze financial documents and transactions and identify the original source of the funds. 

Equitable Distribution: Once the court has a clear understanding of the nature and value of commingled assets, it will proceed with equitable distribution. Maryland courts consider various factors, including the length of the marriage, each spouse’s contributions, financial circumstances, and future needs, to determine a fair distribution of assets.

If you’re involved in a Maryland divorce involving commingled assets, it’s important to be honest and forthcoming about the financial situation. During the divorce process, each spouse should have their own lawyers to represent their rights and interests. A Bethesda divorce attorney experienced in Maryland family law can guide clients through the complexities of commingled assets and advocate for a fair distribution of property. In some cases, spouses may choose to negotiate a settlement outside of court through mediation or collaborative divorce, which can provide more control over the division of commingled assets and lead to a less adversarial process.

How to Avoid Commingling Assets

It’s important to avoid commingling assets during marriage if at all possible. Measures to do so can include:

  • Maintaining Separate Accounts: Each spouse can keep separate bank accounts for their pre-marital or gift/inherited funds to avoid commingling with marital funds.
  • Keeping Detailed Records and Documentation: Keep records of gifts, property or inheritances received during marriage. 
  • Prenuptial and Postnuptial Agreements: Consider entering into a prenuptial or postnuptial agreement that clearly defines how assets will be treated in case of divorce, including the handling of commingled assets.
  • Avoid Joint Titling of Assets: Be careful when putting your spouse’s name on a pre-marital property or other asset acquired before marriage. 

In sum, commingled assets are a common and intricate issue in Maryland divorce cases. They involve the mixing of separate and marital property, making it challenging to distinguish each spouse’s individual assets. 

Contact a Skilled Bethesda Divorce Attorney Today

To navigate the complexities of commingled assets effectively, seek the guidance of an experienced Bethesda divorce attorney. To schedule an appointment with Bethesda property division lawyer Brandon Bernstein in person or remotely, please call 240-395-1418 or CONTACT US CONFIDENTIALLY ONLINE today.