By Alan S. Funk and Ben Hawes
On May 9 and 10, attorneys, CPAs and other professionals convened for the Biennial AAML/AICPA Family Law Conference in Las Vegas. In the following article, the authors summarize some critical components of the professional relationship between family law attorneys and forensic CPAs as it relates to tracing separate property.
Attorneys trace separate property assets and liabilities to overcome the presumption of commingling. Commingling occurs when (1) a substantial amount of separate property is (2) intermixed with (3) a substantial amount of community property to the extent that (4) it is no longer possible to identify whether the remainder is the separate property portion or the community property portion.
Attorneys often engage forensic certified public accountants to assist them in the preparation and presentation of a tracing analysis in an approach that combines both art and science.
The Canvas: What Are the Benefits?
The characterization of property is governed primarily by case law. However, attorneys rely upon expert witnesses, including forensic CPAs, to assist in interpreting and applying certain protocols and procedures of the law.
A court presumes property acquired during marriage is community property.1 Property acquired before marriage or acquired after marriage by gift, bequest, devise or descent will be characterized as separate property.2 The community presumption may be rebutted with clear, cogent, and convincing evidence.3 Whether property is community or separate is retrospectively determined by its character at the date the property was acquired.4
The attorney, as artist, commissions the project by providing a framework (or scope) for the tracing canvas and a vision of the "case" painting. In turn, the forensic CPA interprets the attorney's tracing canvas and vision, and provides the brushes, paint and other tools necessary to complete the painting.
The canvas usually begins as a bank account. Separate funds deposited into an account begin the story. Accounts containing community funds do not become community property unless the funds are so commingled that they cannot be distinguished or apportioned.5
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