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Commingling
and tracking assets
Commingling separate and community property
does not necessarily make one the other. The key is determining
whether the commingled asset can be traced to its source.
Of course, where separate and community
property have been commingled to such an extent that there is no
reasonable manner to trace or identify it, the entire property
or fund is generally treated as community property.
There are different ways of tracing. One
is called "direct" tracing. The other is sometimes called
"family living expense tracing" (also called a "recapitulation"
method).
Using the direct tracing method, for
example in a bank account scenario, requires specific records
that reconstruct each separate and community deposit and each
separate and community payment or withdrawal as it occurs. This
is the most common type of tracing but one that requires solid
documentation to prove it.
Family expense tracing assumes that the
family living expenses and community debts are paid from
community property funds. Therefore, payments or a purchase may
be traced to a separate property source by showing community
funds at the time of the payments or purchase were exhausted by
family and community expenses. This way, using a process of
elimination, the payments or purchase must have been made with
separate property funds.
This method requires one to show that
separate property was actually used to make the purchase. There
are exceptions to this rule. This is not an easy task because
generally there must be actual evidence that community funds
were exhausted at the time the particular asset was acquired or
the particular payment was made.
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