What is transmutation of separate property in a divorce?

On Behalf of | Mar 25, 2024 | Divorce

Most of the time, the assets you acquire during a marriage are considered marital property and assets acquired before marriage – or when inherited or gifted to one spouse during marriage – are considered separate property. While this is usually the case, sometimes the status of these assets may change during the course of the marriage through a process called transmutation.

Transmutation in family law describes how property classified as separate changes status to become marital. For the transmutation of separate property to happen, certain conditions have to be met. In New York, transmutation of separate property typically occurs when separate property is intentionally commingled with marital property. Examples of transmutation of separate property may include the following.

Money deposits into a joint account

If your spouse takes separate property money and deposits it into a joint account in which you have the right of survivorship, that separate property may be considered transmuted into marital property. The act of depositing the separate funds into a joint account signifies an intention to share and merge assets, thereby converting the separate property into marital property.

Increase in value due to investment by non-titled spouse

While investing time or labor in your spouse’s separate property does not translate to transmutation, any increase in the value of the separate property due to your contribution may be considered a marital asset. This means if your contribution leads to an increase in the value of your spouse’s separate property, such as through renovations to a separate property home or improvements to a separate property business, that increase in value may be subject to division as marital property in a divorce.

What is the difference between transmutation and commingling of separate property?

While both transmutation and commingling of separate property involve the intertwining of marital and separate assets, they differ in their underlying intentions and implications. Transmutation occurs when separate property is deliberately combined with marital property, indicating an intent to treat it as jointly owned, whereas commingling refers to the unintentional mingling of separate and marital assets, often making it difficult to distinguish between them. In legal proceedings, transmuted property is typically treated as marital property subject to division, while commingled property may require closer scrutiny to determine its classification and division during divorce proceedings.

If you are contemplating divorce, or if you’re concerned about safeguarding separate property with a prenuptial or postnuptial agreement, seeking legal counsel can provide guidance on how transmutation laws apply in your specific case and what you’ll need to do to seek a favorable outcome to your circumstances.

At The Law Firm of Poppe & Associates, PLLC, our focus is relentless advocacy for our clients. If you or someone you know is considering divorce, reach out to schedule a consultation at 646-665-3903 or by contacting us online.

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Mia Poppe, Esq.

Mia Poppe, Esq.
Managing Partner