What Happens When Assets are Commingled in a High Net Worth Divorce?

It goes without saying that most spouses want to retain as much property as possible after a divorce. Both spouses must continue on with their lives after the end of the relationship, and this is hard to accomplish without the necessary assets and property. If you are dealing with a high net worth divorce, you may be especially concerned about losing property that you consider to be rightfully yours. Thankfully, North Carolina law makes it quite clear that if you owned property prior to the marriage, you can keep this property after a divorce.

However, things get more complicated when you start dealing with marital assets. These are assets that have been accumulated over the course of the marriage. At face value, the concept is relatively straightforward. Marital property is subject to equitable distribution, while separate property is not. Unfortunately, these two different types of property can be mixed together in a process known as “commingling.” Suddenly, it becomes very difficult to determine whether property is separate or marital.

If you have separate property in for example Monroe that has been commingled with marital property, you may be worried about whether you will lose this property altogether. It is a valid concern, as the Union County Divorce Court will generally assume that marital property is eligible for equitable distribution, regardless of whether it has been commingled with separate property. However, there are a number of methods that you can employ to retain separate property, even if it has been commingled with marital property.

If you would like to approach this situation in an efficient manner, you should reach out to a qualified divorce attorney in Union County as soon as possible. There is plenty of help available for Monroe residents who are going through a high net worth divorce, and you do not need to simply walk away from your hard-earned separate property. With a legal expert by your side, it becomes much easier to rectify this situation.

In a North Carolina divorce, there are three different types of assets:

• Marital Property: These assets have been accumulated over the course of a marriage, and they are subject to equitable distribution. Equitable distribution means that they will be divided among the spouses in a fair manner by the court.
• Separate Property: If you have accumulated assets before the marriage took place, this counts as separate property. Unlike marital property, separate property is not subject to equitable distribution. In addition, inheritance funds are always considered separate property:
• Divisible Property: Divisible property means all real and personal property as set forth below:
  • All appreciation and diminution in value of marital property and divisible property of the parties occurring after the date of separation and prior to the date of distribution, except that appreciation or diminution in value which is the result of postseparation actions or activities of a spouse shall not be treated as divisible property.
  • All property, property rights, or any portion thereof received after the date of separation but before the date of distribution that was acquired as a result of the efforts of either spouse during the marriage and before the date of separation, including, but not limited to, commissions, bonuses, and contractual rights
  • Passive income from marital property received after the date of separation, including, but not limited to, interest and dividends.
  • Passive increases and passive decreases in marital debt and financing charges and interest related to marital debt.

However, there is also technically a third type of property that may be involved in a North Carolina divorce, and this is commingled property. As the name suggests, this is the product of marital and separate property that have been mixed together over the course of the marriage. There are many different examples of commingled property. One obvious example is when a spouse uses their inheritance to pay for part of a real estate property during a marriage. Although the money itself is separate because it came from inheritance, the resulting asset (the real estate property) is seen as marital.

Commingled assets can be traced in order to determine what portion (if any) is actually separate property. In the case of the aforementioned real estate example, a spouse might hire a financial expert to trace the financial history of the property. After going through mortgage records, banking records, and purchase history records, a skilled accountant may be able to “unravel” this commingled asset and determine what portion of the property is separate. In this situation, a spouse would walk away with at least the sum total of the inheritance they had initially received.

Although it is too late for couples in the midst of a divorce to avoid dealing with asset division uncertainty, the best way to avoid this situation is by planning out your marriage effectively from the beginning. As a general rule, you should always avoid commingling assets together during marriage. You should also consider signing a strong prenuptial agreement that prevents this situation from ever happening.

If you need to finalize your high net worth divorce without losing your separate assets, reach out to Arnold & Smith, PLLC today. We have a wealth of experience with high net worth divorces in North Carolina, and we know how to overcome a wide range of potential obstacles that may arise in these situations. Commingled assets may represent a challenge for many spouses, but this hurdle can be overcome with the correct strategies. Contact us today at 704-370-2828, and we can start creating an action plan together.