When separate property (an inheritance, pre-marital savings, a personal injury award) is deposited into a joint bank account, it becomes commingled—mixed with marital funds. Proving how much of that original separate property still exists is one of the most difficult problems in divorce litigation.
This is where the Lowest Intermediate Balance Rule comes in.
What Is the LIBR?
The Lowest Intermediate Balance Rule is a legal tracing method recognized by courts across the United States. The principle is straightforward:
If the account balance ever drops below the amount of separate property claimed, then the traceable separate property is permanently reduced to that lowest balance.
Here's why: when a commingled account's balance falls below the separate property amount, some of that separate money has been spent. Under the LIBR, once separate property is spent, it cannot be "replenished" by later deposits of marital funds. This is a conservative, court-accepted method that prevents a party from inflating their separate property claim.
A Simple Example
Suppose you inherited $100,000 and deposited it into a joint checking account that already had $20,000 in marital funds:
Day 1: Account balance = $120,000 (your traceable separate property = $100,000)
Day 30: $50,000 is withdrawn for home renovations. Balance = $70,000.
Your traceable separate property drops to $70,000 — even though the withdrawal
"could" have been from marital funds, the LIBR conservatively assumes separate property was consumed
first.
Day 60: $30,000 paycheck is deposited. Balance = $100,000.
Your traceable separate property stays at $70,000 — the new deposit is marital income,
not a return of your inheritance.
Why This Is Hard Without Software
The example above has three transactions. Real cases have hundreds or thousands. A forensic accountant must examine every single transaction, track the running balance, and compare it against the separate property claim at every point. Miss one transaction, and the entire analysis can be challenged in court.
ExitProtocol's engine processes this automatically. It ingests every transaction from uploaded bank statements, applies the LIBR rule to each one, and produces a complete ledger showing:
• The initial separate property amount
• The lowest intermediate balance at any point
• The current traceable amount remaining
• The retention percentage (how much of the original claim survived)
• A transaction-by-transaction trace with running balances
Advanced LIBR: What Makes ExitProtocol Different
Basic LIBR tracing follows a single deposit through withdrawals. ExitProtocol goes further:
Holistic Account Mode (Pro-Rata Reduction): When an account has multiple separate property claims (e.g., an inheritance AND pre-marital savings), the engine distributes losses proportionally across all claims rather than arbitrarily assigning them to one.
Cross-Account Transfer Tracing: When separate property is moved from Account A to Account B, the engine can follow the trace across accounts, maintaining the chain of custody for the separate property claim.
Dissipation Detection: The engine flags transactions where the account balance drops significantly below the separate property amount, identifying potential dissipation of marital assets—a critical issue in many divorce cases.
The Court-Ready Output
Every LIBR analysis produces a Forensic Report that includes the full transaction ledger, the mathematical trace, an integrity hash (SHA-256), and a certified summary. This report is designed to meet evidentiary standards—it's not an opinion, it's a deterministic computation that any opposing expert can verify by running the same inputs.