By Ron J. Anfuso, CPA, ABV, CFF, CDFA, FABFA
The burden of proof in family law is the obligation of a spouse to bring forth evidence of a claim of separate property. In these instances, assets are presumed community property unless a party sufficiently traces and meets the burden of proof that an asset is separate property. Should the party provide sufficient evidence to prove his or her claim, the burden of proof is met.
In Family Law, when a matter is contested by a spouse who claims disadvantage, the burden of proof falls on the advantaged party to show via a preponderance of evidence that there was no undo influence or a breach of fiduciary duties. When tracing a claim of separate property, the separatizer must present clear evidence that the property is indeed separate since Family Code § 760 establishes the presumption of community property.
Preventing a Successful Rebuttal of a Separate Property Claim
Presenting the case for separate property can be a complicated task. It can involve analyzing several documents through tracing to establish solid evidence that a property is truly separate. Complex tracing demands that the forensic accountant possesses a conceptual understanding of tracing methodologies to achieve the most positive outcome for a client. He or she must employ due diligence and judgment to draw on whatever combination of procedures are at his or her disposal to reach a logical convincing conclusion. Such was the case of In re the Marriage of Dorothy and Joseph Ciprari. (Forensic Accounting Today https://anfusocpa.com/wp-content/uploads/Newsletter-47.pdf and https://anfusocpa.com/wp-content/uploads/Newsletter-48.pdf) In this case, as the forensic accountant, I was faced with an unusually complex situation that required a creative solution. I was able to construct an approach that clearly demonstrated that Joseph’s claim of separate property was indeed valid. As a result, The Appellate Panel concluded that despite Dorothy’s argument to the contrary, substantial evidence supported the trial court’s ruling of separate property.
Rebutting Tracings that Fail to Meet the Burden of Proof
In this case, I testified that the tracings were not carried out properly by the opposing accountant because they did not meet the burden of proof. I explained that the problem with this case was that the separatizer did not provide the expert on the other side sufficient records to perform a direct tracing. The shortfall of the tracing by the other side’s forensic accountant was due to there being numerous years of marriage prior to the beginning of the tracing. This made their task difficult due to missing essential historical documents. In addition, I expounded that there were unsupported allegations of gifts received by the spouse during the marriage that were relied on to claim a separate investment. Documents that would support gifts received during a marriage include the fronts and backs of checks, copies of gift tax returns (IRS Form 709), written letters from the person making the gifts, and/or oral testimony from the gifting individual or entity. Simply providing a check copy with the word “gift” in the memo is not sufficient. In the case of numerous claims of gifts, substantial investigations must be performed to provide the court sufficient evidence to prove the gifts actually occurred.
In this case, a spouse presented partial information of an account that was in his name. I pointed out that this was not sufficient to prove separate property. Merely tracing funds from an account that might be in one of the spouse’s names but failing to trace the actual source of the funds in that account does not prove the property to be separate.
Should These Tracings Have Been Performed?
When sufficient records are not available to perform a proper tracing, there is no reasonable expectation for the court to rule in favor of the property in question as separate. Likewise, when there is a third party involved with the purchase of a property, it is difficult to determine that a property is separate when the advantaged spouse can only uncover partial account information. In cases like these, I would decline to perform the tracings and save the client from the unnecessary expense of an analysis that would not likely be accepted by a court.