Tracing Property in a Texas Divorce
When a married couple in Texas divorces, all of their property must be classified as either community property or separate property. Because one spouse’s separate property is usually not subject to division by a court and remains their separate property after the divorce, this categorization can be very important. However, the spouse claiming something as their separate property has the burden of proving that fact to the court.
Take this example: Wife bought an acre of land three years before marrying Husband. Because Wife acquired the property before marriage, it is her separate property. After six years of marriage, Husband and Wife divorce. Wife still owns the property at the time of the divorce. Is it community property or separate property? Here, the acre of land is clearly still Wife’s separate property; her marriage did nothing to change that. Unlike with their community property, Husband has no claim to any portion of that acre.
Real life is rarely that simple, of course. What if Wife sold the acre three years into the marriage, and deposited the money from that sale into a joint savings account with Husband? What if they then took that money and additional savings they both contributed and purchased a home in both their names? What portion of what property would be community, and what, if any, would be separate?
This is where tracing comes in. Tracing involves establishing the separate origin of the property through evidence showing the time and means by which the spouse originally obtained possession of it.
What Tracing Does
Separate property may change form without changing its character. In the example above, the money Wife received from the sale of her separate property would still be her separate property. It changed form, or “mutated,” but that did not change its essential character as separate property. As long as the Wife can definitely identify and trace the mutation in the form of her separate property, it will remain separate.
There are two general methods of tracing: item tracing and value tracing. Item tracing is used for non-cash assets, such as vehicles and real estate. Here, the “inception of title” rule generally applies. This rule means the separate or community nature of the property is determined at the time the property is acquired. By contrast, value tracing follows cash assets. Texas courts have used a number of value tracing methods to determine whether cash is separate or community property: (1) the community out first method; (2) the clearinghouse method or identical sum inference; (3) the minimum sum balance method; and (4) the pro-rata approach.
For more about the different methods of tracing, click here.
The Tracing Process and Burden of Proof
A spouse must present clear and convincing evidence to establish that an asset is their separate property. There are several methods of proof that may be used, including spousal testimony, expert testimony, documentary evidence, and inventory documentation. Generally, the spouse’s testimony alone is insufficient unless it is corroborated by documentary evidence. An exception to this general rule exists where testimony is not contradicted and the testimony is clear, accurate, and free from suspicion.
Although the concept of tracing is relatively straightforward, the actual tracing process can be highly complex. Variables such as the quantity of property, type of exchanges, length of the marital relationship, commingling of separate and community property, and the available evidence can all affect your ability to prove your separate property is, indeed, your own. Having an experienced divorce lawyer on your side can make all the difference.
If you need guidance identifying and classifying your marital property, contact the Law Office of Robert Tsai online or call 832-287-1995. We have the property tracing expertise to help ensure your separate property won’t be lost, in whole or in part, in your divorce.