1. The Commingling Dilemma
When separate property funds are deposited into a bank account alongside community funds, commingling occurs. If the records are so confused that separate funds cannot be identified, the entire account is deemed community property under § 3.003. However, Texas courts have established equitable accounting methodologies to prevent forfeiture of separate property.
2. The Sibley "Community Out First" Precedent
In Sibley v. Sibley, 286 S.W.2d 657 (Tex. Civ. App.—Dallas 1955, writ dism'd), the Texas court established what is now universally known as the Community Out First Rule:
"Where separate and community funds are commingled in a bank account, it is presumed that community funds are drawn out first for living and community expenses, and that separate funds remain in the account as long as the balance never falls below the amount of separate funds deposited."
3. The Minimum Balance Rule
Operating in tandem with Sibley, the Minimum Balance Rule dictates that the lowest balance reached by a commingled account between the time separate funds were deposited and the valuation date represents the maximum amount of separate property that can be claimed.
If an account starts with $100,000 in separate funds, and during the marriage the balance drops to $20,000, then $80,000 of separate property has been irretrievably lost. Subsequent community deposits do NOT replenish the separate property balance.
4. Practical Tracing Exhibits in Texas Courts
To prevail in a contested Texas probate proceeding, a party must prepare a contemporaneous day-by-day or monthly spreadsheet showing each deposit and withdrawal, classifying each line item under the Sibley hierarchy.