Commingled property makes for surprises when it is divided in a divorce. A money gift to one spouse deposited in an account in both names become commingled property and may be viewed as a gift to the marriage, i.e., both parties.

Transmutation by commingling happens when separate and marital property become mixed together to such a degree that each cannot be identified and separated for purposes of classification and distribution; transmutation by gift, which is also called transmutation by intent or agreement, happens when the owning spouse makes it a gift to the marriage, or when the spouses agree that martial property should be conveyed solely to one or the other of them. Disputes happen when separate funds are placed in a joint account or when marital funds are placed in an account that had been separate. Combining marital and separate funds in a single account generally makes the separate funds marital "only when it is impossible to trace the separate funds."

Dual classification, equitable distribution states do not have uniform definitions of separate property, but all agree on two points. First, property acquired in exchange for separate property is separate property, and second, separate property becomes marital property when the owner gives it to the marital estate.

Very often young couples starting life together pool their money and do not worry about ownership during the happy times of the marriage. For example, they pool their bank accounts, and add to this money funds they received wedding gifts with the idea that down the road they will use it for a house.

Cases where marital and separate money have been commingled often have be traced before they can be divided as part of a property distribution.

Normally, questions about transmutation turn on arguments about whether separate property became martial as a result of commingling. Sometimes, the question turns on whether marital property became separate. This is called reverse transmutation.

For a variety of reasons, married couples sometimes transmute martial property into separate property. In a dispute, the burden of proof is on the party seeking to prove that the gift was made. There must be clear and convincing evidence that both parties intend that martial property become separate property because both parties have an interest in the marital property.

Reverse transmutations often happen in conjunction with what are midnuptial agreements, which are those made by spouses after their marriage but before (and not necessarily in anticipation of) a divorce. Couples sometimes enter into midnuptial agreements as part of tax or estate planning.

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

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