When divorcing couples in Sacramento think about dividing their property, they believe that property can be divided into two classes: marital property and separate property. Marital property is divided 50/50 between the spouses, while separate property belongs to the spouse who owned it prior to the marriage. But, sometimes, property division can be complicated by the commingling of assets. What exactly is commingled property?
Commingled property is property that was separately owned before the marriage but was invested in an asset that provided income or appreciated in value during the marriage. The income or appreciation in value produced by the separate asset during the marriage is commingled property and is treated as community property, that is, the income or appreciation in value is divided equally. The asset itself remains the separate property of the spouse who owned it before the marriage.
Pensions provide especially complex examples of commingled property. The increase in value of the pension during the marriage will generally be regarded as commingled property, but pensions are subject to many technical rules that govern valuation, division of the plan, and disbursement of benefits. These rules are imposed by both the government and the plan itself. Once the plan has been properly valued and the timing and amount of benefits resolved, the division of the plan assets and the payment of benefits will usually be set forth in what is called a Qualified Domestic Relations Order. This order governs when and how much of the pension benefits are payable to each spouse.
Valuing commingled property can be a complicated task, requiring the use of property appraisers, accountants and other specialists. Divorcing couples who own significant amounts of commingled property would be well-advised to consult a knowledgeable divorce lawyer to ensure that the valuation of commingled property and pension plans is properly resolved.
Source: California Courts, “Property and Debt in a Divorce or Legal Separation,” accessed on April 2, 2018