In a state like California, it’s important to define assets as community and separate property. Where community funds are mixed with separate property funds, the combined account is known as a “comingled asset.” Comingling and tracing are two measures taken in the context of spousal property during marriage.
Comingling occurs when a spouse’s separate property is mixed or combined with the other spouse’s separate property, or with marital property.
Comingling occurs when a spouse’s separate property is mixed or combined with the other spouse’s separate property, or with marital property. For example, when a spouse deposits marital funds into their separate fund account, those funds become comingled. The spouse must be able to “trace” the funds back to their separate property source to prove that some of the funds in the account at the time of divorce are separate.
In community property states such as California, comingling assets is not enough to change the property’s identity. As long as each asset remains identifiable, the property will remain either separate or community. However, if it is impossible to trace the source property, the whole will be treated as community property.
Comingling raises a presumption that comingled money is community property, and the spouse who claims some of the money belongs only to him/her has to prove it is separate property.
When funds are withdrawn from a comingled account and used to purchase property, the spouse must prove the acquired property is separate and was purchased with separate money. Otherwise, the property is considered community under the rule that property obtained during marriage is assumed to be community property.
If a large amount of separate property is comingled with a small amount of community property, making tracing impossible, the comingled funds are not community property. If a spouse claims the remaining part of the comingled account is separate property, he/she must prove that the withdrawals were community in nature.