ARTICLES

Mixing Marital and Non-Marital Property

One of the more complicated issues in divorce law, and one that affects almost every case, is determining what happens when marital and non-marital property is mixed. The examples are endless and every case has some form of the problem.

Commingling of assets occurs when marital property is contributed to one spouse's non-marital asset. The character (marital vs. non-marital) of the asset doesn't change, but the commingling creates a right of reimbursement. For example, say your spouse had a car before the marriage and at the time of the marriage there was a small balance due on the loan. If, after the marriage, you use marital assets (a paycheck) to pay off the car, you've contributed marital assets to your spouse's non-marital estate. The car remains your spouse's non-marital property, but the marital estate has a right to be reimbursed for the amount of the contribution.¹

There is an exception to the right of reimbursement argument, however, that can prevent the marriage from being reimbursed from the non-marital estate.² The unique facts of each case will determine whether the reimbursement should, or should not, be made.

Commingling also works the other way – it can occur when non-marital property is contributed to the marriage. Again, the contributing estate (the non-marital estate) may have a right of reimbursement against the "receiving estate" (the marital estate), but the character of the asset received does not change from "marital" to "non-marital" just because of the transfer. Following on the example above, say after the wedding you buy a minivan and finance part of the purchase with a loan. Later, you sell the car you owned before the marriage (non-marital) and apply the proceeds from the sale (the cash from the sale of a non-marital asset is still non-marital property) against the loan balance. You've contributed non-marital assets (your non-marital cash) to the marital estate. The minivan doesn't become partly non-marital. Instead, it remains marital property and you may have a right of reimbursement against the marital estate.

Rights of reimbursement are not guaranteed in court. The legal analysis will not reach too far back in time, either. Courts often consider whether a party transferred an asset through one estate merely as a conduit.  Consider the case of the Wojciks³:  The husband inherited money (non-marital_ and deposited it in a joint, marital account.  From there he transferred the money to several other accounts over several months and bought a motorcycle.  The motorcycle was found to be marital property.  The wife also deposited non-marital funds (gifts) into the same account but transferred them back out after only one day.  The court concluded that she used the  joint account merely as a “conduit.”  

Rights of reimbursement can be difficult for non-attorneys to prepare and prove in court. Strict rules of evidence must be satisfied if you hope to prevail on such a claim. If commingling assets is an issue in your case, work with an attorney familiar with the evidentiary requirements, rules of court, and the rules of evidence to improve your odds of success. The cost of the legal advice and counsel will be worth it.

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