When it comes to divorce, you hear a lot of talk about property. There are discussions about marital and non-marital assets and how they’re divided. These issues are particularly relevant to Californians, as the state operates on a model of “community property division.” In essence, divorce courts attempt to divide the marital assets evenly, giving each spouse 50% of their overall value.
Something you hear less discussed is the concept of “commingled” property. In this article, we will define what this property is and help explain how it is divided in a divorce.
Defining Commingled Property
To understand commingled property, you must first understand marital and nonmarital assets. Marital assets are owned by both spouses, and nonmarital assets are owned by just one.
Essentially, anything that was purchased during a marriage is automatically owned by both parties, a marital asset. Nonmarital assets come from outside the marriage. They include gifts from someone other than your spouse. Any property you owned before the marriage may be nonmarital, as could any inheritance you receive while married.
Commingled property exists in a grey area. It may have been easiy to define initially, but over time, ownership becomes more nebulous. Ownership of a home, for example, can be disputed, redefined as commingled. Imagine a woman who owns her home, living in it alone for years. Eventually, she marries, and her husband moves in.
On the surface, it appears that the home belongs to her alone. However, you must also consider the husband’s contribution to the home. Imagine he begins treating the home as a marital asset. He starts pouring money into repairs and remodels. He personally manages its upkeep and maintenance. By the time of the divorce, he can make a strong case for coownership of the home.
Each spouse’s contribution to the property can blur the line between nonmarital and commingled assets. Bank accounts are another common example of commingled property. Only one person may have used this account. Over time, however, the other spouse makes continued, consistent contributions to the account. Furthermore, they use it as their own, taking money from it to pay bills. Eventually, this account becomes commingled.
In California, a state full of people who work in creative fields, intellectual property (IP) is a hot issue. Intellectual property is an idea to which you own the rights, and you can profit from it. Superman and Bugs Bunny are the intellectual property of Warner Bros.; Mickey Mouse and Captain America are owned by Disney; etc. IP can also include the rights to a medicine, invention, and so on.
In a divorce, the ownership of intellectual property can be difficult to define. Like any other property, contribution to the IP can make it commingled property.
Picture an artist working on his new comic strip, Pizza Man. He created the character long before his wedding. While married, he works hard on his creation. He obtains the rights and finally gets the character published. Eventually, the character takes off, resulting in toys, t-shirts, and other merchandise. Beyond moral support, his wife had nothing to do with the creation or maintenance of Pizza Man. In this scenario, the artist’s intellectual property could be his alone, a nonmarital asset.
Now consider a different scenario. The artist works on his character and gets married. Making enough money to support them both, his wife offers to pay all the bills while the artist works on his character. He agrees. From there, the character becomes successful, and the merchandise gets produced. In this situation, Pizza Man could be a commingled asset. Without help from his wife, the artist may never have been able to get his character off the ground.
There is a third situation, one that’s even vaguer. The artist has been married for years, working a regular graphics artist job, and he suddenly develops Pizza Man. In this situation, marital ownership can be hotly debated. Regardless of the wife’s direct contribution to the character, she can attempt to claim coownership. Because all property is a marital asset, the wife can argue that she has rights to the character. To counter this claim, the artist must demonstrate that the wife made no contributions to the character or that she directly hindered its success.
Dividing Commingled Property
As with any issue of divorce, you can take the matter to court. This is a lengthy, expensive process. Each spouse must make a case for entitlement to property. This requires work from attorneys, which costs money. Each lawyer must investigate each claim. This can involve interviewing witnesses, regular meetings with clients, digging into financial records, and more. Each step the attorney takes raises the cost of legal fees. Then, the matter must be argued in court, requiring time and money from everyone involved.
Fortunately, there is a better way to handle the issue. You are always free to make property decisions on your own. For something as complex as commingled property, we recommend that you use a mediator. This is a neutral third party that works for both spouses. You and your spouse meet with them, and they help facilitate negotiations. They can help everyone communicate by clarifying needs and keeping everyone listening. A good mediator can cool the temperature of the room if tempers start to flare.
By working with a mediator, each spouse agrees to all determinations. Noe one will be compelled to do something they don’t want, and everyone can walk away more satisfied.
If you’re concerned about commingled property and ready to negotiate with your spouse, reach out to our firm. We help couples come to amicable solutions, avoiding the trauma of a vicious courtroom battle. For a free consultation, call our office at (949) 558-2624 or contact us online.