When making division of community assets and debts, including reimbursements for the payments of community obligations, determining which party has the burden of proof, is a threshold issue that can be dispositive. This issue often arises when one spouse has exclusive control of community investment or retirement accounts.

In Margulis, the husband continued to manage the parties’ joint finances post-separation, including community investment accounts. Just before trial, the husband disclosed for the first time that the community investment accounts were nearly exhausted. Moreover, the husband claimed that the depletion of the accounts was due to stock market losses and payment of community obligations. Significantly, the husband failed to introduce any supporting evidence of his claim at trial. The trial court dismissed the wife’s argument that the husband should be charged with the missing funds unless he proved that he did not misappropriate the funds.

The Court of Appeal reversed the trial court holding: “Once a managing spouse makes a prima facia showing of the existence and value of community assets in the other spouse’s control post-separation, the burden of proof shifts to the managing spouse to prove the proper disposition or lesser value of those assets. Failing such proof, the Court should charge the managing spouse with the assets according to the prima facia showing.” Marriage of Margulis (2011) 198 CA4th 1252.

The lesson from Margulis for the spouse managing community assets post-separation is to keep detailed records of community funds and community obligations paid from community funds. Additionally, be sure to disclose the records to the other spouse and introduce the records as evidence during the trial. Failure to do so could mean that the managing spouse will be responsible for the full amount of missing funds.

Do you want to hear more about the latest information on the management of community finances? If you have questions regarding this issue, please contact our office to schedule a consultation. The Law Office of Family Law Specialist Richard E. Bawden also handles legal issues regarding adoption, annulment, mediation, domestic violence, child custody, child support, spousal support and bankruptcy as well as pre-marital agreements. Telephone (909)792-0222, or email us at [email protected]

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