How Separate Property Can Become Marital Property

{3:42 minutes to read} It’s perfectly normal for most married couples to live their lives without knowledge of the intricacies of separate and marital property in New York matrimonial law. Unfortunately, though, that lack of knowledge can lead to common and innocent “mistakes” and have unintended consequences under the law.

Our Typical Couples

A couple maintains only joint accounts and holds all property with the other named on all assets. This has been what they have done since they were first married and have never given it a second thought. So, when one received a large gift from a parent, they just deposited it into a joint account and made withdrawals from the account, as usual. 

They each may have had an account in their individual names before they got married, and have kept those accounts, depositing some of their paychecks into them and using the accounts to pay their expenses.

One of them owned a home before the marriage. They decided after the marriage that it made sense to put it into both names so that if one died, the other could inherit the home.

Commingling

The law defines commingling as when you have something that is clearly separate property, such as an account that you had before you were married, into which you then deposited marital money (such as your salary). 

Transmutation 

Transmutation of a separate asset into a marital asset under the law occurs when you add your spouse’s name to an asset that would be considered separate property. The transmutation for our typical couple could be claimed when the real property was transferred to joint names. Similarly, the gift from the parent, while separate property when given, could lead to a claim that it became marital property when deposited into the joint account.

If commingling or transmutation occurs, it doesn’t necessarily mean that you have lost everything. You may be entitled to some kind of credit or, under certain circumstances, may even be able to retain the separate property nature of the asset.

That determination, however, can certainly involve a significant amount of attorney's fees to resolve the issue if you are in a contested situation with your spouse. On the other hand, if you are in a mediation, you will not only understand what the law provides and the questions that would be inherent in determining if a commingling or transmutation occurred but more importantly: 

•How the other person feels about it;

•Why the other person commingled or transmuted the asset; and/or

•What the other person intends to do with the property/asset if it can be retained as their separate property.

And you might just come to a conclusion on your own that you both can feel good about. That resolution will take into consideration all of the facets of the law—as well as the feelings, reasoning, and intentions of both of you—and eliminate the hurt, time and cost of an adversarial process.