How does one go about determining if financial assets are separate property...

How does one go about determining if financial assets are separate property (owned by one spouse) or community property (owned by both spouses) in a divorce?

By Cathleen Collinsworth
October 12, 2014
CA FAQs/Financial Issues

As an accountant and CDFA™, I have been involved in many cases of tracing the separate property of an individual spouse throughout a marriage. One such case involved almost $2 million in deposits over a ten-year period in 13 different accounts. The scope of the assignment was to show that the community did not have an interest in one particular bank account, regardless of how the title was held.

Although this process can seem tedious and overwhelming, my firm has compiled a list of tasks that make the tracing faster and easier. We used the following process to resolve the above-mentioned case, and it represents the general system used in all cases.

  1. Inventory all pertinent documents.
  2. Determine what documents are missing and/or still needed.
  3. Prepare a document request.
  4. Schedule each disbursement and each deposit for all related bank accounts.
  5. Analyze each bank account deposit-by-deposit to determine the source of funds.
  6. Determine if any deposits are transfers between bank accounts.
  7. Analyze  each disbursement to determine if it was a transfer between accounts.
  8. Whenever a direct tracing is not possible, look at all documents and possibly find a corresponding date and amount.
  9. Once all bank accounts have been analyzed, the next tasks are:
    1. Prepare a summary of the bank activity showing total deposit and withdrawals.
    2. Identify origin of non-transferred funds.
    3. Identify where non-transferred funds were spent.
  10. Inventory all pertinent documents.
    1. Prepare a schedule of the community bank account.
    2. Schedule of community income.
    3. Schedule of community living expenses.
    4. Schedule of other disbursements.

Once all of these tasks are completed, step back and look at the work and ask: “Does this make sense?” When I reviewed my work, looking at the total traceable funds and compared it to the community standard of living, I was able to show the funds were not community (owned by both the husband and wife).

Although you’ll need to determine which records are applicable for your individual case, this basic process has been extremely successful in tracing separate property.

Cathleen Collinsworth is a lawyer at Forensic Accounting Offices in Orange & Riverside County, Irvine & Menifee, California. She can be reached at 949 262-3692 or 951 679-8940 or thru email. View the firm profile here and firm website here

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October 12, 2014
Categories:  FAQs

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