Tracing To Establish What Property is Yours in a Community Property State
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What is Community Property?
Generally, anything a married couple accumulates during the marriage is considered community property; that is, both spouses own an undivided share of the whole. This is true even if one spouse earned all the income while the other spouse stayed home. Therefore, during the course of marriage anything obtained through community labor is a community asset unless one spouse can prove it is their separate property.
What is Separate Property?
Separate property is property that is not community property and belongs to only one of the spouses. Although the majority of property accumulated during marriage is community property a few items like the ones listed below will be considered separate property even if they were acquired during marriage. These include:
- inheritances and gifts
- personal property used wholly or principally for a business
- property acquired under a trust
- property that the partners declare is separate under an agreement
- property acquired before the relationship began
- property acquired with the proceeds of separate property and not intended for the use or benefit of both partners
What is Tracing and How Does it Work?
Tracing is a way to distinguish between separate and community property. Often during the course of marriage couples join or commingle their property. If the assets are commingled it is difficult for a court to determine what is separate property. Tracing your separate property over the course of time from when you first got it until the present is essential.
An example of commingling and separate property would be if you inherited a million dollars from your parents. The one million dollars is your separate property, but if you put that money in a joint bank account that you regularly use with your spouse tracing that money may be difficult. Although it is your separate property at first, you would need to engage in tracing for the court to determine it is your separate property and not community property to share with your spouse.
Other common examples of commingling of separate assets that might require tracing include a business owned prior to marriage that was maintained during the marriage, and improvements made with separate funds during marriage on a home purchased prior to marriage.
Should I Get a Lawyer to Help With Tracing?
Determining what is and what is not your separate property can have serious financial implications during your divorce. Hiring an attorney to make sure you get what you are entitled to is a good idea. Tracing can be very difficult and if it is not done properly your rights to keep your separate property will be lost.
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Last Modified: 10-16-2012 10:57 AM PDT
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