Property division in a California divorce can become complicated when separate property and community property funds are placed into the same account. This is commonly referred to as commingling.

Commingling does not necessarily mean that separate property automatically loses its separate character. However, the spouse claiming a separate-property interest may need financial records sufficient to trace the property back to its separate source.

What Is Commingling?

Commingling occurs when funds of different property character are mixed together.

For example, a spouse might enter the marriage with money in a separate bank account. During the marriage, community earnings may then be deposited into that same account.

Money may subsequently be withdrawn to pay household expenses, purchase investments, make a down payment on real estate, or acquire other assets.

After years of deposits and withdrawals, determining which funds were separate and which were community can become difficult.

The analysis may become even more complicated when money moves through several accounts before being used to purchase another asset.

What Does It Mean to Trace Separate Property?

Tracing is the process of connecting property claimed as separate property to its separate-property source.

California recognizes traditional tracing methods, including direct tracing and the family living expense, or recapitulation, method. Courts may also consider other reasonable and properly supported tracing methods depending on the circumstances.

The important point for divorcing spouses is that a separate-property claim generally requires more than simply saying, “That money originally belonged to me.”

The source materials emphasize the importance of an actual tracing supported by records.

Bank statements, deposit records, withdrawal records, purchase documents, and other financial information can therefore become critical when establishing what happened to funds over time.

Why Financial Records Matter

Suppose a spouse receives an inheritance during marriage and deposits it into an account containing community earnings.

If money is later withdrawn from that account to purchase another asset, the spouse may claim that the purchase was made using inherited separate property.

Proving that claim may require records showing what money entered the account, what money left the account, and the balance and character of the funds at relevant times.

Simply comparing the total amount of separate deposits against total withdrawals over several years may not be enough. The tracing must connect the funds to the particular acquisition or payment at issue.

In financially complicated cases, a forensic accountant may be used to analyze the records and assist with tracing.

Preserve Records Before They Become Difficult to Find

Commingled-property disputes can involve transactions that occurred many years before the divorce.

Older bank statements and financial records may be harder to obtain as time passes. A spouse claiming a separate-property interest should therefore identify potentially relevant accounts and gather historical documentation as early as possible.

The existence of separate property may be only the beginning of the analysis. When those funds have been mixed with community money, documentation showing where the funds went can become just as important as proving where they originally came from.