In most jurisdictions, a transfer of separate property into joint names transmutes the property to marital, and this rule has been applied to realty. Thus the deposit of separate funds in a joint account makes the funds marital. The funds are treated as a gift to the marriage, and the party claiming otherwise must rebut the presumption with clear and convincing evidence.

Tracing becomes difficult when names are added to accounts and when funds from each spouse move in and out of the account, particularly when deposits and withdrawals are made for both marital and separate purposes.

A party trying to prove that money in an account is separate must trace the funds to separate property; that is, he or she must prove that the funds were premarital, a gift or an inheritance. Some courts, however, have held that when property is routed through a joint account merely for convenience there is no martial gift presumption.

However, the commingling of funds does not necessarily effect transmutation. Funds may be combined for a variety reasons and still be considered separate property.

The question of whether commingled funds are transmuted may turn upon whether the source of funds can be traced and classified as separate or marital. When marital and separate funds are combined in a single account, most courts have held that transmutation happens only when it is impossible to trace the funds.

In tracing funds, courts approach the challenge of uncommingling combined funds in a number of ways beyond a strict tracing. They include 1) consideration of whether funds withdrawn from the account were used for separate purposes, such as the maintenance of separate property, or marital purposes, such as living expenses; 2) whether the spouses "have an agreement or understanding that separate funds would be pr preserved"; 3) whether living expenses during the marriage exceed the family income; 4) whether withdrawals during the marriage were less than the amount of separate deposits; and/or 5) whether the total marital property deposits were less than an account balance at the time of the divorce. (In the last three approaches -- differences between family expenses and family income, between withdrawals and separate deposits, and between total marital deposits and account balance -- argue that the money in the account is separate property.)

See also Commingling; Interspousal Gifts; Prenuptial and Antenuptial Agreements; Midnuptial Agreement; Separate Property; Equitable Distribution; Community Property; Kitchen Sink States; Dual Classification States.

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