CLASSIFICATION OF SEPARATE PROPERTY AND MARITAL PROPERTY IN A UTAH DIVORCE—Segment #1: Inextricably Commingled Separate Property
By: Zachary C. Lindley, Esq.
Gallian Welker & Beckstrom, L.C., St. George, Utah
As discussed in the Introduction to this blog post series, one of the exceptions to the presumption that separate property retains its character is when such property has been “inextricably commingled”—a costly classification for the spouse to whom the separate property would otherwise belong.
Courts are given broad discretion in making the determination as to whether separate property has been commingled with marital property so as to lose its character.[i] The analysis is highly fact intensive and there is no common rule upon which to rely in every case.
The following list represents some of what a court may consider in determining whether to classify otherwise separate property as marital property:[ii]
- Whether there was expenditure of marital funds on the proposed separate property.
- Whether co-mingled funds were subsequently transferred into an account that would otherwise be classified as separate property.
- Whether, despite being put in the name of a third-party, marital funds were used to open a separate account.
- Whether an account that would otherwise be deemed separate property is funded with a party’s day-to-day income and expenses, including marital earnings.
- Whether marital funds have been expended toward separate property in the form of loan payments, taxes, etc.
- Whether a party’s marital income, along with that party’s separate earnings, have been deposited into an account, and then said account is used to pay both business and personal expenses.
- Whether an account consisting of both marital and separate property is used to make payments toward the purchase or improvement of otherwise separate real property.
- Whether the property has been maintained in segregated accounts and portfolios.
- Whether the only change to the property is a result of conversion from one investment medium to another, g. stocks, bonds, real estate, etc.
- Whether a party uses proceeds from the sale of an asset owned prior to marriage to purchase another asset during marriage, and then that party uses marital income to make installment payments or effectuate other upkeep on the asset purchased.
- Whether, despite premarital and marital funds being deposited together, it is still possible to trace and separately identify the funds, therefore maintaining the character of the property rather than losing its “identity.”
- Whether the property is only temporarily placed in a joint account.
- Whether, regardless of the change of the property through certain transitions, the separate property remains traceable and identifiable.
- Whether the property becomes so commingled that it is impossible to distinguish or apportion it.
- Whether there are sufficient records or evidence from which a determination can be made as to which portion of the combined fund is separate and which is community property.
- Whether, despite being commingled for only a short period of time, there is other evidence that the co-mingled property was intended to be a gift to the community or that its status would thereafter be altered.
- Whether the separate funds are far in excess of community funds deposited in the same account, resulting in more easily effectuated tracing.
Takeaways for Family Law practitioners:
When advising clients, ensure that you acquire all supporting documentation of the transactions surrounding any claimed separate property that has potentially been commingled with marital property. If such property can still be identified and traced, in a manner that is understandable to the parties and the court, there is a chance it will retain its character and not be converted to marital property.
Look for Segment #2 of this blog post series regarding the other spouse’s augmentation, maintenance, or protection of separate property.
[i] See Clarke v. Clarke, 2012 UT App 328, 292 P.3d 76; Elman v. Elman, 2002 UT App 83, 45 P.3d 176.
[ii] The list provided herein is supported by the following authority: Sandusky v. Sandusky, 2018 UT App 34, ¶12, 417 P.3d 634; Liston v. Liston, 2011 Utah App 433, 269 P.3d 169; Keiter v. Keiter, 2010 UT App 169, 235 P.3d 782; Oliekan v. Oliekan, 2006 UT App 405, ¶23, 147 P.3d 464; Schaumberg v. Schaumberg, 875 P.2d 598, 603 (Utah Ct.App.1994); Dunn v. Dunn, 802 P.2d 1314, 1321 (Utah Ct.App 1990); Burt v. Burt, 799 P.2d 1166, 1169 (Utah Ct.App 1990); Mortensen v. Mortensen, 760 P.2d 304, 308 (Utah 1988); 37 Am. Jur. Proof of Facts 2d 379 § 8. Mode of transmutation—By commingling; In re Marriage of Shui and Rose, 132 Wash.App. 568, 125 P.3d 180 (2005); Myrland v. Myrland, 19 Ariz.App. 498, 508 P.2d 757 (1973); In re Marriage of Jafeman, 29 Cal.App.3d 244, 105 Cal.Rptr. 483 (1972).