October 2, 2026
In a New York State divorce, property is divided between spouses using the foundational principle of equitable distribution. The process of equitable distribution involves identifying the assets and debts held by both spouses, determining if such assets and debt are separate or marital property, and determining the value of each asset and debt. Everything that follows in a negotiation or courtroom depends on getting this process right.
In many cases, the largest assets in a marital estate are retirement accounts, particularly for couples with a long marriage. A 401(k), 403(b), or IRA that has been accumulating for decades can rival or even exceed the value of a shared residence. Unsurprisingly, these accounts are also a common subject of separate property claims. If a party can substantiate such a claim, the corresponding retirement account or a portion of the account is excluded from equitable distribution.
A tracing analysis examines whether an account was funded from separate property sources or from marital sources, such as income earned during the marriage. Accountants are often asked to analyze the post-marriage activity of an account that was established before the date of marriage, or to determine whether growth in an account balance resulted from the active efforts of the account holder or from passive forces such as market performance and broader economic conditions.
The tracing analysis shows the flow of funds through various transactions across different points in time. Various source documents from financial institutions, financial advisors, and/or employers are inspected in order to understand the nature of each transaction and the relevant timelines.
Account statements and other relevant bank records, such as deposit slips, check images, or withdrawal slips, are needed to accurately complete separate property tracing for retirement assets. In an ideal scenario, these records need to cover the period from the date of marriage, or the inception of the account (if later than the date of the marriage), through the date of divorce action. If complete records for the associated time period are unavailable, clients, attorneys, or the court may be able to establish an alternative end date the records need to cover.
Supporting records often include:
Assembling records is frequently the most difficult obstacle, especially where the analysis period spans many years. Financial institutions and employers don’t retain records indefinitely, and gaps in documentation present a real hurdle, because the burden of proving a separate property claim rests with the party asserting it.
Where documentation is limited, reasonable assumptions can sometimes be developed from the records that do exist. For example, if account statements are missing for a stretch of years but the underlying investments remained unchanged, it may be reasonable to conclude that the change in account balance over that period reflected the performance of those securities.
As a starting point, the balance of a retirement account at the date of marriage can be deemed separate property. The activity that follows is what matters for the separate property tracing process.
If no contributions were added during the marriage, the underlying investments remained unchanged, and the account grew based on the market returns of its underlying investments, the separate property character remains intact. If contributions were made through paycheck deferrals, or funds were added from accounts holding marital earnings or other marital assets, this can constitute a commingling of separate and marital property. Continued payroll contributions during the marriage progressively dilute the separate property component. In some cases, the volume of commingling can completely negate the separate property claim altogether.
At a minimum, the party asserting the claim needs to establish the origin of the separate property, whether that is a pre-marital account balance, funds received by gift or inheritance, or proceeds from the sale of other separate property.
Separate property and commingling are legal concepts. Accountants are engaged to conduct the analysis, illustrate the transaction flow, and present the mathematical concepts associated with the change in account balance over time. However, accountants are not qualified to opine on the legal aspects of separate property and commingling, and those determinations remain with the court.
In many engagements, the practical value of a tracing analysis is allocation. Where an account contains both separate and marital property, such as a pre-marital retirement account that received payroll deferral contributions throughout the marriage, the analysis quantifies the marital and separate property components of the account balance and illustrates how the separate property portion changed over time.
Our forensic accounting and matrimonial consulting professionals work with attorneys and their clients to identify and compile the necessary records, perform the tracing analysis, and present findings clearly for negotiation, mediation, or testimony. If you are evaluating a separate property claim involving retirement assets, we can help you understand how to navigate the process.
