I recently resolved a case where my client inherited money, deposited it into a community account, and then subsequently purchased stock (which subsequently became very valuable stock). She claimed that the stock was purchased with her inheritance money. Her husband claimed it was purchased with community money.
Determining whether the stock was community property (i.e., owned by the “community,” the partnership of husband and wife) or my client’s separate property required what is called “Tracing.” “Tracing” is a test imposed by the court to determine, among other things whether a party can show that their separate property (usually money) has survived after being moved about, and sometimes when assets have been purchased out of accounts in which separate monies have been deposited.
There are generally two types of Tracing: “Direct Tracing” and “Family Expense” or “Recapitulation” Tracing.
In our next Divorce Helpline blog post we will take a look at Direct Tracing and in the following blog we will review how this applies to our example. In future blogs we will examine Family Expense Tracing, and one of the big traps a spouse can fall into related to Tracing.