Character of Property: Tracing Property Purchased from Commingled Funds

Question 1

What are the two important presumptions for tracing funds in a commingled account?

Answer 1

1. Available community funds are presumed to have been used to pay for family expenses;
2. Absent evidence of a reimbursement agreement, a gift is presumed when separate funds are used to pay family expenses

Question 2

What are the two permissible tracing methods?

Answer 2

1. Exhaustion Method;

2. Direct tracing

Question 3

What is the “exhaustion method”?

Answer 3

“Exhaustion Method” = showing that at the time the asset was purchased, community funds in the account had already been exhausted by payment of family expense, and therefore the asset must have been purchased with separate funds.

Question 4

What is the “direct tracing” method?

Answer 4

“Direct tracing method” = shows that at the time the asset was purchased, there were separate funds available, AND the SP proponent intended to use those separate funds to purchase a SP asset

Question 5

What is the rule re: “recapitulative accounting”?

Answer 5

The SP proponent MAY NOT simply show that total family expenses exceeded total community income, and conclude that all remaining funds/assets purchased from commingled accounts are her SP

Question 6

What are the consequences with regards to a commingled account (and assets purchased from it) if the SP proponent fails to trace?

Answer 6

If SP proponent fails to trace, the entire commingled account and assets from commingled account are treated as CP

Question 7

What is the effect if a commingled account is jointly titled ?

Answer 7

Probate code Sec 5305 provides that the contents of a bank account held jointly by married persons is presumptively CP.

HOWEVER –> this presumption may be overcome by tracing to once spouse’s SP (unless parties expressly agree that such sums will be CP)

[[[Is this true for death only?]]]