Among the many difficult issues you may deal with in a divorce, property division can become one of the most complex. When is an asset separate property, community property or commingled property? For couples with a high net worth, answering this question can be like untying a knot.
The basics of property division
Since California is a community property estate, the family court in a divorce will automatically consider all property acquired by either spouse during the marriage to belong to both spouses equally. Separate property is the exception and will remain with the spouse who owned it. But an asset must be proved to be separate – it’s not enough to just say it is. And even if something is separate property, it can be commingled with community property, making it difficult to properly identify.
How asset tracing can help
Asset tracing is the process of investigating the history of an asset and obtaining documentation to support its classification as either separate or community property. Note that asset tracing can be used to back up a claim that something is separate property or to rebut a claim that it is. The point of tracing is clarity.
It can apply to stocks gifted to one spouse during the marriage, but which was commingled with marital funds later on. Or consider an asset which was purchased by one spouse prior to the marriage, but marital funds were then used for its maintenance. Asset tracing is used to clarify exactly how much of an interest each spouse has in the asset, so that the appropriate percentage is subject to division via community property rules.