Asset Tracing: Can It Benefit High-Net-Worth Couples?

By Jones & Associates Law P.C.

Divorce can be a complex process. Nowhere is this more true than with respect to property division, particularly for couples with a high net worth. Their assets and liabilities are often more varied and unique than those of other couples, making mistakes far more likely to occur.

What Is Asset Tracing?

Since New York is an equitable distribution state, at the outset of any divorce all assets must be classified as either marital property or separate property. Separate property will remain with the spouse who owns it and marital property will be divided equitably.

Asset tracing is an accounting process used to track the life of an asset to be classified as separate property. Why does this matter? Because New York carries a presumption that a couple’s assets are marital property, rather than separate property. This presumption can be overcome but it requires documentation, so that the court is satisfied its classification is proper.

Couples with a high net worth may have assets such as real estate, businesses, stock interests, inheritances or many others. And while establishing these assets as separate property may be straightforward in some cases, often it is not. What was initially separate property can easily become commingled throughout the marriage, making it difficult to determine exactly who owns what, or in what amount.

Shares of stocks can be placed into a joint account. Marital funds could be used to pay the mortgage on a home owned prior to the marriage. Even an antique bequeathed to one spouse, but worked on by the other, can increase in value and become commingled. Asset tracing helps to put an accurate value and share of ownership on each of these types of assets, so that distribution can be performed properly.