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Tracing separate assets after co-mingling with marital assets

| Jun 15, 2020 | High Asset Divorce |

During a marriage in Texas couples share many aspects of their lives with their spouse. This includes activities, hardships, accomplishments, finances and other aspects of their lives. In fact most assets that people earn or obtain during the marriage is considered to be community (marital) property regardless of which spouse earned it or obtained it. This is generally not a major issue while the couple is married, but this can be a major issue if the couple goes through a divorce.

However, people also may enter the marriage with significant assets or money. People also may inherit money or assets from a loved one during the marriage. These assets are considered separate property and generally these assets are not subject to division in a divorce. If the assets are kept separate the entire marriage, this can be relatively easy to do, but many people will co-mingle these assets with community assets in an account or through a major purchase.

This does not mean that people will automatically lose those separate assets, but the separate assets need to be traced. This can be done by using a few different methods. The most common is that if separate money is combined in an account with community money, then the first money out of the account is community money and separate money remains in the account. Another way is that the first money out is separate money, but people will need to show intent in these situations. The default is that community money goes out first.

Another method is a pro rata method where the percentage of community and separate money in an account is determined and then each time money goes out it goes out based on those percentages. People also may be able to show that separate money was put in and then that exact sum being taken out to demonstrate that the money remains separate money. There are other methods as well depending on the circumstances.

It is not uncommon for married couples in Texas to have both separate and community property. Sometimes this money is combined in accounts or other assets. Tracing co-mingled assets can be complicated and consulting with experienced attorneys could be beneficial.