The Texas Constitution, Article XVI, Sec. 15, defines Separate Property as all real and personal property of a spouse owned or claimed before marriage, and that was acquired afterward by gift, devise, or descent shall be the separate property of that spouse.
States with community property law require a “tracing of funds” to determine the nature of money in a marital estate, either community or separate funds. Also, according to the Texas Family Code, Subchapter E. § 3.402, the nature of expenditures for purchasing assets or paying liabilities determines if a reimbursement claim is proper. Without financial records and an accounting system, tracing a marital estate can be cumbersome, take extensive time, and possibly not succeed. The degree of proof necessary to establish the property as separate property is “clear and convincing” evidence. As a general rule, mere testimony that property was purchased with separate funds, without any tracing, is insufficient to overcome or rebut the community property presumption.
Texas Family Code, Subchapter E. § 3.402, Claims of Reimbursement, Offset: allows an offset as it relates to expenditures of the separate property of one spouse by the other spouse and thus the separate property benefiting the community estate. Separate Property reimbursement transpires when the Community Property Fund balance reaches zero and money expended from the spouse’s Separate Fund Balance. The criteria for the qualified expenditures are cited in Sec. 3.402.
Tracing separate and community funds date back to James D. Stewart, a San Antonio family lawyer. He prepared a tracing sheet on paper and meticulously recorded bank transactions in chronological order. He identified the Sources and Uses of the funds and maintained balances for separate and community funds. He used the Sibley  “community-out-first rule.” 
The review and analysis of voluminous records (bank, brokerage, and credit card accounts) still exist, but the paper tracing method has been replaced by a SQL database, reports generated in MS Excel, and the elimination of the arduous physical line-by-line input. Sage uses optical character recognition, proprietary algorithms, and technology named “DIO” to categorize and create Sources and Uses of Funds Reports for bank and brokerage accounts. It summaries quicker than manual input. In addition, the tracing can help derive a one-page summary of the Claim of Reimbursement Report if Texas Family Code, Subchapter E. § 3.402, applies.
Sage Investigations has adopted the best practices and procedures based on study and experience.
If your clients are faced with a divorce matter that requires tracing assets and liabilities, claims for reimbursement, or other complex financial investigations, contact Sage Investigation, LLC. DIO is waiting to help you process the case data, follow the money, and advance the development of your case. To learn more about helping your client, contact Retired IRS Special Agent Edmond J. Martin, Chief Investigator at Sage Investigations, LLC, email firstname.lastname@example.org or call 512-659-3179. You can also visit our website: www.sageinvestigations.com and view the CVs of our team.
 Texas Family Code, Subchapter E. § 3.402, Claims of Reimbursement: Offsets
 Sibley, 286 S.W.Zd 657 (Tex. Civ. App.-Dallas 1955, writ dism’d).
 Texas Bar Journal, December 2016, by Richard R. Osinger.
 2022 Best Practices for Tracing by Sage