Dividing assets in a divorce can be straightforward when ownership is clear, and each asset can be distinctly classified as marital or separate. However, it’s not always the case. Over the course of a marriage, assets often get commingled or mixed together.
Common examples include inheritances deposited into joint accounts, premarital savings used for family expenses or personal funds reinvested alongside marital earnings. Commingled assets can make it difficult to determine ownership, which can complicate the property division process. This is where tracing comes in.
What is tracing?
Tracing is the legal and financial process of identifying the origin of funds or property that has been commingled during a marriage. It helps establish what portion of a blended asset remains separate property and what is up for division.
The process involves reviewing bank statements, investment records, financial transactions and other relevant evidence. Accountants or financial experts may be called upon to follow the paper trail. Courts also consider the unique circumstances surrounding each case when resolving these issues.
It can make a meaningful difference
When commingled assets cannot be clearly untangled, courts are often left with little choice but to presume they belong to the marital estate and are subject to California’s community property laws. In such situations, even assets that you solely owned may be divided as though they were jointly owned.
Tracing ensures your separate assets are accurately identified and distinguished from marital property. This can be particularly important in high-asset divorces where the stakes are high.
Safeguard your financial interests during divorce
Commingled assets are commonplace, especially in long-term marriages. While tracing can help clarify ownership and preserve separate interests, it’s a process that requires careful documentation and strategic presentation. Reaching out for legal guidance can help you identify commingled assets and take the necessary steps to protect what’s rightfully yours as you pursue a fair asset division.