Marital dissolution raises tracing challenges
Aho & Associates was retained by the wife to trace and characterize assets and debts as part of her marital dissolution. The case presented a notable tracing challenge because the marriage encompassed an unusually high number of complex transfers involving separate and community property, commingled funds, family gifts and loans, and multiple real estate transactions. These transactions occurred among a dozen bank, investment, and retirement accounts over a span of seven years.
The wife entered into the marriage with significant cash, investments, and real estate. In addition to receiving support for her children from a previous marriage, the wife supported her parents who in turn frequently lent the wife money for real estate acquisitions. The husband argued that virtually all the funds and real property was a combination of community property and his separate property.
We were asked to trace the wife’s source of funds throughout the marriage in an effort to show that the husband’s property characterizations were wrong and his demands excessive. During our investigation we obtained statements of long closed accounts, recovered lost receipts for expenses incurred by the wife in connection with her real property investments, and found other transactional evidence that both parties had presumed could not be obtained.
After segmenting the movement of funds, we conducted an asset tracing analysis throughout the marriage. Given the complexity and scope of the marital finances, we used both the direct tracing and the exhaustion methods. This allowed us to compare results for variances while giving the wife’s counsel additional insight and a stronger negotiating position.
Ultimately, we were able show that—contrary to the husband’s assertions—a substantial portion of the marital assets constituted separate property of the wife. As a consequence, the husband accepted a property settlement offer that was nearly the opposite of what he had originally demanded.