In a California divorce, property falls into one of two major categories: marital property and nonmarital property. Marital property, generally, is any property that was acquired while you were married. Technically, both spouses own these assets. Nonmarital property is anything that belongs to you alone. Standards vary, but mostly, this is property you brought into the marriage, a gift given by someone outside the marriage, or assets you inherited through a will or trust.
California uses a community property division model in a divorce. You can think of this model as an “equal” division of property. The state looks at the overall value of the marital assets. This includes savings, debt, and physical property. Then, it attempts to give each spouse exactly 50% of the value of this property.
With a physical asset, such as a home or car, the court has a few options. It can give the property to one person and ask them to pay the other half the value. The court can also order a physical trade. Whoever gets the property must sacrifice assets to the other at half the property’s value. The court can also avoid this whole situation, ask that the property be sold, and split the profits between the spouses.
There is also a third category: commingled property. This property appears nonmarital. However, when a spouse helps contribute to nonmarital property, they can claim partial ownership. In this article, we will explore commingled property. We will provide examples of how nonmarital property can become commingled, and we will offer solutions on how to untangle this property.
Examples of Commingled Property
The family home is one of the more common pieces of property that becomes commingled. Let’s say that you buy a house. You live in it alone for years. Eventually, you meet someone, start dating, fall in love, and get married. This person moves into your home with you. After several years, the relationship goes sour, and you divorce. At first glance, it appears that you will keep the home. It was yours before you were married, therefore it should be nonmarital property.
However, events during the marriage can change the status of nonmarital property. It all depends on your spouse’s contribution to that property.
Your Spouse Made No Contribution
After the marriage, your spouse agrees to treat the home as “yours” alone. You pay for all maintenance and upgrades, and you initiate all such work. Only your income goes into the mortgage. This situation is rare, but it helps illustrate a point. When going through the divorce, you can make a strong argument that your house is nonmarital property, based on your spouse’s lack of involvement. You were the only one who managed and maintained the home, and you owned it before the marriage.
Your Spouse Heavily Contributed
Keeping with the same scenario, imagine your spouse becomes intimately involved in the home. Now married to and living with you, they treat the home as their own. They help initiate and pay for repairs and remodeling. They contribute to the mortgage payments, etc.
“Contribution” goes beyond the financial. Maybe your spouse doesn’t put a dime into the house, but they become a stay-at-home parent. As such, they manage the home. They keep the place clean while you work. You may pay for all repairs and remodels, but your spouse initiates these projects. They spend far more time in the house, and they mold the space around their needs.
When your spouse is an active keeper of the home, they can justifiably claim that the space is now marital property.
Your Spouse Made SomeContribution
Perhaps your spouse, for the most part, stays away from managing the home. There is, however, a moment where they pay to upgrade the air conditioner. An addition like that has more value than just the temperature. It may keep mold away. The new unit could save money on the energy bill, allowing you to spend more on upgrading the home.
In situations like these, your spouse could claim at least partial ownership of the home. If the court agrees, your spouse’s percentage of ownership will be treated as a marital asset.
Next, let’s focus on an intangible, creative asset like an intellectual property. IPs are creative ideas, patents, medicines, and so on that can generate money without the creator’s involvement. For instance, you could patent an invention and license the design to manufacturers, collecting money off their work. IP is especially relevant to California residents, as many of its citizens work in entertainment and technology.
Like any physical asset, your spouse’s contribution will determine their entitlement to your IP. Let’s explore the idea the same way we did with a house.
Your Spouse Made No Contribution
Imagine you work on your invention before you get married. After the wedding, you continue developing your project, and your spouse stays out of the way. The work is treated as your day job or your hobby. Eventually, you finish your product, patent it, produce it, and start making money. In a divorce, it could be easy to claim that your spouse has no entitlement to this intellectual property.
Your Spouse Heavily Contributed
With an IP, contribution takes many forms. Perhaps your spouse supports you financially while you develop your idea. Maybe they are directly involved, offering ideas or making hands-on contributions. In such scenarios, they may have a valid claim that the IP is marital property.
Your Spouse Made Some Contribution
Intellectual property laws are tricky. The smallest contribution could lead to partial ownership. Creative companies are very aware of this, and they are meticulous about the level of ownership their workers can and cannot have.
Imagine you are working on a cartoon character. Everything about the character comes from you alone, from its design to its backstory. Your spouse, however, names the character. A contribution that minor could still entitle them to part ownership.
Securing Commingled Assets
Going Through Divorce Court
When you need sole possession of your commingled assets, you must be prepared to make a strong argument against your spouse’s ownership. You must demonstrate that they made no contribution to the asset, or their contribution was so minor as to be insignificant.
Perhaps they did add to the asset. In that case, you must show that your contribution was more significant than your spouse’s.
You can also prove that they actively hindered or attempted to sabotage the asset. Take IP, for example. Perhaps your spouse had no respect for your project, constantly criticizing and attempting to alter the final product. This could be grounds to claim that they stood hindered the creation rather than helped it
Deciding for Yourselves
In any divorce-related issue, it’s always best to make your own agreements. When it comes to commingled property, you and your spouse likely have strong feelings on the matter. In that case, consider negotiating your property division with the help of a mediator. They can facilitate the conversation and allow reason to prevail during talks. By creating agreements with your spouse, you can feel better knowing that no one “won” or “lost.” All decisions were made mutually, giving you power over the outcomes.
If you need help with keeping or dividing commingled property, reach out to our firm for help. Call (949) 565-4158 now for a free consultation, or contact us online.