Don’t be Overburdened, Keep Those Records

Keeping the actual documents that show how much money you have and/or where the money came from and went to can be critical in a Divorce Case, since tracing those funds to show that they are your separate property – not community property – is often the difference between keeping it all for yourself and being forced to split it up 50/50. The opposite principle is also true: having the documents that show that the community estate had some asset and/or funds can mean getting to split them up 50/50. A Good Divorce Attorney will tell you to keep critical records like tax returns and account statements showing large balances just in case. In the recent case In re Marriage of Prentis Margulis & Margulis (2011) 198 Cal.App.4th 1252, the hazards of not keeping good records was reiterated by the Appeals Court. The parties separated in 1996, but Husband continued to handle the community finances and pay Wife’s bills up to 2001. In June of 2002 Wife filed for Divorce, but Husband did not file his Response until February of 2007. After a separation of more than 11 years the parties disagreed regarding what was left of the community estate and therefore what should be divided 50/50. Husband had managed the community accounts, but he failed to provide the records showing where the community funds had went. Husband asserted that Wife had no proof that he had taken the funds and Wife asserted that Husband had not shown where the money went. In a different setting this might have been referred to as a “he said she said” type of case. Alas for Husband, he was not so lucky. Wife had a single document (her Exhibit 18) which Husband had prepared in 1999 showing $787,000 in community assets. That lone document was enough to shift the burden of proof to Husband so that he had to show where the money went and/or show what the value was at time of trial. The case was worse for Husband than being stuck owing half (or more) of that $787,000 due to poor recordkeeping. Husband had commingled community and separate funds, and could not show what the source was for the payment of approximately $590,987 in payments he claimed he had made on Wife’s behalf over those 11 years of separation. Not providing the documentation meant that he could not trace the source, and could (the case was set back to the Trial Court) result in him losing all or a large part of any reimbursement and/or credit he would have been awarded for those payments. A Good Divorce Attorney will know when the burden of proof might be shifted, as it was in the Margulis case, and will advise his clients to keep good records. Not every legal cliché you hear is as accurate as you might think. “Possession is nine tenths of the law” did not pan out for Husband, because he owed a fiduciary duty to show Wife where the money he had sole possession of went (he had a bad run in with the other tenth of the law). Another legal cliché, “get it in writing” proved to be spot on for Wife, since that one document prepared by Husband shifted the burden of proof.