Page 34 - Family Law Services

Chapter 5

Marital Property

It is not uncommon for a matrimonial attorney to ask a CPA to perform an asset tracing, lifestyle analy-
sis, or account analysis. Each of these terms may have different meanings to the CPA and counsel.

Having a clear understanding of the attorney(s) objective and properly defining the scope of the en-
gagement will enable the CPA to help counsel achieve the desired goals.

Scope of the Tracing Engagement

Defining the Tracing Services to Be Provided

Tracing is a method of identifying property as being either marital (community) or separate. State law
defines marital and separate property, and case law typically identifies accepted methods of tracing and
apportioning commingled assets to identify the marital or separate interests therein. The CPA should
work closely with the attorney to understand the underlying law and applicable case law they are to fol-
low when performing an asset tracing analysis.

Marital property is typically defined as property acquired by one or both parties, however titled, during
the marriage, except when it can be identified as separate property. Separate or nonmarital property is
property acquired before the marriage, property acquired by inheritance or as a gift from a third party,
property excluded from the community by valid agreement, or property directly traceable to any of these
sources. Separate or nonmarital property must remain separate during the marriage. Separate or nonmar-
ital property may be converted into marital property if the property is commingled with marital property,
or a significant contribution of marital efforts is made by either spouse. When assets are commingled,
the CPA may need to analyze the source and use of funds to determine if the property can be clearly
identifiable as separate or if the assets have been so commingled that they are no longer directly tracea-
ble as separate property.

The concept of marital and separate property is a legal issue. An expert’s tracing analysis may be used
by the trier of fact to assist with determining if property is marital or separate.

Deliverables and Deadlines

Communication prior to preparing the retainer agreement is important to the process of laying out the
scope of the engagement, the anticipated use of the analyses, and the expected delivery date of any re-
port(s) to be issued.

Purpose of the Tracing

Prior to starting the analyses, a clear understanding of the purpose of the engagement is needed. For ex-
ample, if, after further discussions with counsel or the client, a detailed lifestyle analysis is requested,
the CPA may determine that the intended purpose of the analysis is to trace the disposition of monies
from a bank account. Starting the lifestyle analysis without a complete understanding of the engagement
may result in the request of nonpertinent documents and incur unnecessary time and fees, possibly de-
laying the resolution of the matter and resulting in dissatisfied attorneys and clients.

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