What Does it Mean to Commingle Separate and Marital Property in Maryland?

Maryland follows the doctrine of equitable distribution in divorce. This means that a court will divide any assets acquired during the course of a marriage in a way that is deemed equitable to both spouses. Equitable does not mean equal or fair. The equitable division of assets can become more complex when marital property in Maryland has been mixed with assets that are characterized as separate property. This is referred to as the “commingling of assets.”

What are Commingled Assets?

In order to understand what commingled assets are, it’s essential to first understand the difference between marital and separate property. Marital property in Maryland is defined as any property acquired by either spouse during the course of the marriage. Separate property is that which is owned by either spouse prior to the date of the marriage, or excluded by valid agreement, gifted by a third-party, or inherited. Importantly, only marital property is subject to equitable division in divorce.

The commingling of assets occurs when marital and separate property are mixed. This can make it difficult to trace the origins of property, and more challenging to divide it fairly in divorce.

How Can Commingling Happen?

The commingling of assets is common in marriages, especially those that are long-term. Over time, the lines of what is separate property and marital property can become blurred, making it difficult to differentiate how property is classified. Some common examples of commingled assets include the following:

• Using an inheritance to renovate the marital home
• Depositing a personal injury settlement or an inheritance into a shared bank account
• Using marital funds to expand a business started by a spouse prior to marriage
• Using marital assets to pay the mortgage on a home bought by a spouse before the marriage
• Purchasing new property with both separate and marital assets
• Transferring funds from a pre-marriage retirement account into a joint retirement account

One of the biggest issues that can arise with commingled assets is lack of documentation. If you do not have detailed records, it can be very challenging to divide the property in divorce. Receipts, bills, bank statements, titles, and financial records can help trace the origins of the assets. Without records, it can be difficult to track how funds were moved, and a court might assume the entire asset is marital property, subject to equitable division.

How Does a Court Determine How to Divide Assets That Are Commingled?

Dividing marital property in Maryland can become much more complicated when commingled assets are involved. The court would need to first identify which assets are commingled. This involves tracing each asset to determine whether it was initially marital or separate property. Tracing property is a complex process that often requires the assistance of a forensic accountant.

Once commingled assets have been identified, a judge would need to determine how much of each asset’s value should be classified as marital property. That portion of the asset would be divided equitably by the court. Any increase in value to a separate piece of property due to the other spouse’s contributions would typically be considered marital property subject to equitable distribution.

What is deemed a fair division of property by the court may not always be the best outcome for the spouses, particularly when it comes to the commingling of assets. Mediation and the collaborative divorce process are two alternatives to litigation that can allow spouses to determine property division for themselves, rather than leaving things to a judge to decide. Both processes emphasize open communication, reduced conflict, and tailored solutions. Importantly, these out-of-court processes give spouses an opportunity to explore creative and flexible options to divide assets that have been commingled, as opposed to the limited options that are available at court.

Using a Prenup or Postnup to Determine How Commingled Property Should Be Handled

When deciding how marital property in Maryland should be divided in divorce, a judge would assess whether there is a prenuptial or postnuptial agreement in place. If the spouses signed a valid prenup or postnup, it can determine how commingled assets are divided in divorce. For instance, a prenup or postnup can define what is considered separate and marital property. A provision can also be included that specifies how the division of commingled assets should be handled.

A prenup or postnup can prevent the commingling of assets from happening in the first place. The document can determine that any separate assets mixed with marital assets should be treated as marital property. It can also award specific assets to each spouse and keep the issue of property division out of litigation in the event of divorce.

Contact an Experienced Maryland Divorce Attorney

Property division in divorce can be emotionally charged — and the issue of commingled assets can make the matter even more contentious. At the Law Office of Shelly M. Ingram, our Fulton, Maryland divorce attorneys provide our clients with trusted legal services for a wide variety of divorce and family law matters, including property division. Trained in collaborative divorce, mediation, and traditional divorce litigation strategies, we work closely with our clients to achieve a positive outcome in every case.

To schedule a confidential consultation with an experienced Maple Lawn divorce attorney, call us at (301) 658-7354 or contact us online.