Can an inheritance account that is actively traded (day trading) be considered co-mingled?

Question

Community property state (CA).  Husband received inheritance from parents. He kept it in an account only in his name. He then began to actively trade stocks and more than quadrupled the balance in the account.  Are his day trading profits still protected assets?  It seems that the intent of community property law is to clarify that efforts made by each spouse during the marriage are equally owned.  Would his active trading be considered the same as working/income?   Since these funds keep going into the same account as the original inheritance, has the entire sum been co-mingled?

Andy Cook · Answer

This is a good question.  A lot may depend on other circumstances.  If Husband is in a significantly better position than Wife, a Court might try to find a way that this is community property.  It would be important to research the case law to see if this issue has been addressed before.  One way the issue could be resolved is to look at whether the gains are passive (i.,e., Husband just pushed a few buttons on the computer and the account grew) or active (Husband researched investment possibilities, spent a lot of time on the investment endeavors and then realized a gain).  In the second situation, a court is more likely to find a community property interest.  But it would be harder to argue that the whole inheritance is community property; a judge just isn't likely to do it.  And this is not like a case where the inheritance funds were mixed in with another bank account.

Q: Can an inheritance account that is actively traded (day trading) be considered co-mingled?