Things to Consider Before Commingling Marital Assets

If we’ve said it once, we’ve said it hundreds of times – nobody gets married thinking they’ll one day get divorced. However, divorce does happen and at one point it might happen to you. The best plan for anything in life is to be prepared. This is why we have insurance, right? Nobody plans to have a car accident or appendicitis, but things happen, and having the foresight of insurance makes the entire process less financially stressful.

This is why we advise couples just starting out together to talk about premarital agreements, which can spell out how you and your spouse will divide your property and assets while you’re married, or if you get divorced. We bring this up today because we recently read an article that reminded us of the importance of protecting your personal assets, because you simply never know what the future may bring.

A person named “Wondering in California” wrote into MarketWatch seeking advice:

I bought my home in California for $520,000 in 2017. It’s now worth $980,000. In 2019, I met my now-wife who moved in at the beginning of 2020. We married six months later in July 2020. Things were going great and we decided to have one bank account. I also added my wife to my home on the deed as 50/50 in January 2021.

“Wondering in California” goes on to say that after that, their relationship did a “180” and now they want to divorce their wife.

Their nearly-million-dollar question is, “Is my wife entitled to half of my home given that she is on the deed and not the loan? Keep in mind she was only added to the deed in 2021. Or is she only entitled to the equity from the time her name was added to the deed?”

MarketWatch’s Quentin Fottrell answers the question simply and with dismay:

This is one of those letters where I wish you had written before you put your wife’s name on the deed of your house, and before you had commingled your bank accounts. For everyone else, it serves as a cautionary tale. Your wife is entitled to half of your home and half of your commingled funds, in the event that you divorce.

Fottrell is correct. As we gathered from their name, the writer is from California, which is a community property state. “Wondering in California” also mentioned a nearly $100,000/year disparity in the couple’s incomes, with their wife making less money. However, with a shared bank account, Wondering’s wife will be entitled to half of those shared funds as well.

To commingle or not to commingle?

Unlike California, North Carolina follows the equitable distribution model when it comes to property division. This means property between divorcing spouses should be divided in an equitable fashion, rather than 50/50. Only marital (or shared) property is up for division, and this is where commingled assets come in.

“Commingling” generally refers to the mixing of funds. When we’re talking about a married couple, the legal explanation of commingling notes “certain assets acquired during a marriage as being jointly owned by both spouses. If a spouse mixes their separate property with marital property, such as in a joint bank account, and there is later a divorce, then the spouse risks forfeiting some of the separate property when the marital property is divided.”

Although you may be tempted to keep your funds and assets in a joint account once you are married, perhaps for convenience, you must be cautious. Even things you believe are yours and yours alone can end up as marital property if handled incorrectly. We’ve talked about this before regarding inheritances, for example. If your great-grandmother passes away and leaves you individually a great deal of money, but you deposit that money into your and your spouse’s joint account, you have commingled funds and turned your inheritance into shared property.

If you are thinking about getting married, our family law attorneys recommend thinking about a prenuptial agreement to ensure you don’t end up like “Wondering in California,” who is likely “Wondering” where all their money went. We can provide guidance on how to start your marriage off on a strong foundation, with honesty and transparency so there are no surprises down the road.

Fottrell left “Wondering” with these words, with which we agree:

It’s a tough break — and a lesson to people everywhere to be careful about protecting their assets, especially with someone who they may have married in haste. Romance and emotions aside, six months or even a year is typically not long enough to get to know someone. People may behave in accordance with their wants and needs. You have learned that, and it could be a costly lesson.

Our lawyers have decades of experience working with all types of clients in all types of situations, including inheritances and gifts, high net worth divorce, and other family law matters.

If you have questions, call the family law attorneys at Epperson Law Group, PLLC today. We can provide guidance to help make the best decision for your future and your family. Whether you’re looking to draft a prenuptial agreement, postnuptial agreement, or discuss estate planning needs, we have the information you need. Call our offices or fill out our contact form to schedule a consultation. We work with individuals and families in Charlotte, Boone, Weddington, and Concord.