SHORT ANSWER · TRACING RULES
What is the lowest intermediate balance rule?
The lowest intermediate balance rule says the funds you can trace to a deposit can’t be more than the lowest balance the account reached afterwards. If 10,000.00 of separate funds goes in and the account later dips to 4,000.00, only 4,000.00 stays traceable, even after new deposits. Courts and jurisdictions apply tracing rules differently.
DEFINITION
What is a lowest intermediate balance rule?
The lowest intermediate balance rule is a tracing convention that limits the funds traceable to a deposit to the lowest balance the account reached between that deposit and the date of the claim.
WORKED EXAMPLE
How does the rule work on an actual account?
Here it is with made-up round numbers on an account that starts empty. Choosing a tool? See the best asset tracing software.
| Step | Activity | Account balance | Traceable separate funds |
|---|---|---|---|
| 1 | Deposit of separate funds, +10,000.00 | 10,000.00 | 10,000.00 |
| 2 | Withdrawals, −6,000.00 | 4,000.00 | 4,000.00 |
| 3 | Deposit of other funds, +7,000.00 | 11,000.00 | 4,000.00 |
| 4 | Deposit of other funds, +3,000.00 | 14,000.00 | 4,000.00 |
The balance climbs back to 14,000.00, but the traceable amount stays at the low point of 4,000.00. The later deposits are treated as new money, not a refill of the separate funds. This isn’t legal advice, and the rule may be applied differently where you are.
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WHY THE STATEMENTS MATTER
Why does the rule need every statement?
Because the low point can sit in any month. If one statement is missing, the lowest balance might be in it. In Matter 25-117, checking ••4417 has no April statement, so nobody can say how low the account went between 18,240.55 on March 31 and 21,905.10 on May 1. ZeraBooks flags that gap, and the Balance column carries the running balance wherever the bank prints one.
The rule is one piece of a wider trace; see what is asset tracing? and how do you trace funds through bank accounts?
Do later deposits restore the traceable amount?
Under the rule as usually described, no. Later deposits are treated as other money unless it can be shown otherwise, and how that is handled varies by jurisdiction.
Where is the rule used?
In tracing disputes such as separate property in divorce and trust claims. Each court applies its own version.
Does ZeraBooks apply the rule?
No. ZeraBooks proves the statements and flags missing months, so the low point you find is the real one. Applying the rule is the expert’s work.
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