What is commingled property, and how can it impact your divorce in Michigan? To understand what we mean when we talk about commingled property, as well as to understand how the court handles it, you will need to learn a little bit more about property division in the state. We will provide you with some information about property division, what it means to commingle property, and some examples of the dangers of commingled property. Finally, we will say more about what options may be available to you if you have already commingled property and are considering divorce.
Learning More About Property Division and Commingled Property
First, under Michigan law (MCL 522.401), marital property is divided according to a theory of “equitable distribution.” This means that the court will identify both assets and debts from the marriage, and it will proceed to divide them in a way that is fair to both of the spouses. The court only divides marital property, which refers to both assets and debts. To be clear, though, only marital property gets divided in a divorce. This means that any separate property, also known as non-marital property, will not be divided.
What kind of property gets classified as separate property? Generally speaking, the following types of property typically will be deemed separate or non-marital property and not subject to division:
- Property acquired by either spouse before the marriage;
- Property acquired by either spouse after the separation;
- Property given to one of the spouses as a gift during the marriage; and
- Property inherited by only one of the spouses during the marriage.
What, then, is commingled property? Commingled property is a term that refers to the mixing—or commingling—of separate property with marital property. Why is this a problem? In brief, it can make it difficult and sometimes impossible for a court to determine which amount of the marital property comes from separate property. As such, the spouse who commingled his or her separate property may find that the property becomes subject to division during divorce as a result of commingling.
Examples of Commingled Property and What You Can Do
What are some examples of commingled property? Here are some hypothetical situations to consider:
- One of the spouses has a savings account she started before the marriage. When she gets married, she and her spouse want to buy a home. She uses money from her savings account—separate property—as the down payment on the marital home.
- After buying a marital home, the couple realizes that the house needs a lot of work. Since one of the spouses has a savings account she started prior to the marriage, the spouses rely on that money to make a number of improvements. The house later increases in value as a result of the improvements.
- Both spouses decide to combine their savings accounts from before the marriage into a single savings account, and both spouses take money out of the account during the marriage.
- One of the spouses sells stocks that she purchased before the marriage in order to invest in a small business that she and her spouse are planning to run together.
These are just a handful of examples of commingled property. Under Michigan law, courts typically say that if the separate property is traceable within the marital property, then it will not be subject to division. However, in situations where the separate property has been commingled for so long or has changed so significantly that it cannot be traced, it usually becomes marital property for the purposes of distribution.