In Texas, all property owned during the marriage is presumed to be community property of the parties, subject to division upon divorce. That presumption may be rebutted by showing that some assets are separate property of one of the parties. Separate property is that property that was owned by a spouse before the marriage or obtained through gift or inheritance.

But what happens when a spouse receives a gift of money and puts it in a bank account that already has community money in it. Can the separate funds be traced? Or is the separate property lost to comingling?

Richard Orsinger provides a very instructive article in the December issue of the Texas Bar Journal where he talks about the development of Texas family law as it relates to tracing separate property funds in a bank account.

In 1955, the Austin appellate court first applied the “community-out-first” rule to tracing funds in a bank account. This rule was adopted by the Houston 14th court of appeals in 1976 and the Corpus Christi court of appeals in 1990, and is widely held by family lawyers to be the current state of the law.

The community-out-first rule means that when separate property money is deposited into a bank account with community money, the separate funds maintain their character and “sink to the bottom” of the account – leaving the community funds to be spent first. So, if there were sufficient funds in the account to cover the separate balance at all relevant times, the separate balance would remain intact.

To prove the existence of the separate property funds, a tracing schedule can be prepared to show the balance of the community funds when the separate property went into the account, then trace the withdrawals as it affects each of the community and separate fund balances through to the present date, leaving the remaining community and separate fund remaining balances. Tracing schedules such as these are commonly used by family law attorneys and forensic CPAs.

To read the full article see Richard Orsinger Follow the Money.

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW. She was named one of the Best Lawyers in America for 2016 and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.