If Olivia sold her house before marriage and bought another home with the proceeds during marriage, what type of property is the equity in the new house?

The correct answer is that the equity in the new house is commingled property. When Olivia sold her house before marriage, the proceeds from that sale were her separate property because they were acquired prior to her marriage. However, once she purchased a new home with those proceeds during the marriage, the situation changes.

Commingled property refers to assets that may begin as separate property but become intertwined with community property, making it difficult to distinguish their origins. In this case, since the new house was acquired during the marriage using the proceeds from a sale that was initially separate property, it is considered commingled. The equity in the new home reflects both Olivia's separate property contribution and the contributions made during the marriage, which might include mortgage payments, improvements, or appreciation.

In contrast, separate property would solely belong to one spouse, community property is jointly owned by both spouses, and exempt property typically refers to assets that are protected from creditors. Understanding these classifications helps ensure that property rights are recognized accurately in marital contexts.