Commingled Bank Accounts Flashcards
What is Commingling?
When both CP and SP funds are deposited into the same account
Consumption from Commingled Accounts
Family Expense Presumption – spouses have a duty to provide support for one another during marriage
Rule 1: If funds from a commingled account are used to pay family expenses, we presume that CP funds are used first. SP funds are only deemed to be used for family expenses when CP funds are exhausted
Rule 2: When SP funds are used to pay family expenses, the SP estate does not have a right to reimbursement, unless there is an agreement otherwise
Family expenses include: food, rent, medical and dental care, vacation (things consumed, not acquired)
Acquisitions from Commingled Accounts
This is when property is purchased (rather than paying for expenses)
Characterize Property:
General CP Presumption – property acquired during marriage is presumed to be CP
SP Proponent can rebut by tracing the funds to SP source
Methods for Tracing from Commingled Accounts
- Total Recapitulation
- Exhaustion Method
- Direct Tracing Method
Jointly-Titled Accounts
General CP Presumption applies, but the SP proponent can rebut that presumption by tracing
Total Recapitulation
SP if, at the end of the marriage, SP can rebut presumption by showing that community expenses were greater than community income over the length of the marriage (there was a deficit in community income)
- Characterization of property still at time of acquisition
- Courts no longer use this
- Can only be used to establish character of property when, through no fault of their own, the SP proponent cannot prove the balance of income and expenditures at the time the property was acquired
a. Ex: fire, natural disaster (ledgers destroyed, less common now with online banking)
Exhaustion Method
SP proponent can rebut the CP presumption by showing that, at the time of acquisition, all CP in the account was exhausted by family expenses (must show that community expenses exceeded community income at the time property acquired)
- When commingling funds, you assume burden of keeping records to establish income and expenditures at the time asset is acquired
- Most jurisdictions use this
- This method is most favorable to the Community
See v. See
Exhaustion Method
Holding: a spouse who wants to ensure that SP will remain separate could easily keep a bank account for separate property funds and separate account for community funds
Takeaway: rejected theory of Total Recapitulation because it would make it so that you couldn’t actually characterize property until the marriage ends, but character should be based on when it is acquired
Direct Tracing Method
SP proponent can rebut CP presumption by showing:
(1) availability of SP funds,
(2) intent of SP proponent to use those funds, and
(3) must show disposition of funds via documentary evidence and testimony
This is most favorable to the SP proponent
Estate of Murphy
Holding: can use direct tracing method but must also show disposition of the funds to show that SP funds were used to acquire property (evidence of a link between SP expenditures when they were made and the source of funds)
Takeaway: you need a detailed schedule of funds going in and out to use direct tracing
Marriage of Frick
H commingled CP salary with SP income but showed that he received specific amounts of SP each month that he deposited into commingled account and paid a specific amount every month, testified his intent was to use SP funds to make payments
Holding: not enough because records are inadequate, don’t show full activity of the account
Takeaway: contemporaneous deposits and payments with testimony of intent are insufficient, need more detail
Marriage of Mix
W makes more than H, has separate SP account, argues property she bought is her SP, shows records of her SP deposits, expenses, and balances. Testifies that she intended to use SP funds
Holding: records alone not enough to rebut presumption, but combined with testimony re intent, it was sufficient to rebut presumption.
