“There is no principle of which I am aware in the family law context that limits the application of tracing by number of transactions or mere changes in the form of the asset. Nor can such limitations be implied into the language of the marriage contract. At each stage, the question is whether the beneficiary can show that the subsequent property or proceeds were acquired, or partially acquired, with assets traceable to the trust property.
Thus, it is not the transformation of the asset that brings tracing to an end. Rather, it is the inability of the beneficiary to prove the necessary connection or nexus between the trust property and the subsequently acquired asset. For example, tracing may reach its limit when an asset is spent or dissipated or where it is used to pay down debt or otherwise becomes co-mingled with other assets such that the original trust property can no longer be discerned.
I have found no case which suggests that the excluded nature of property begins to “peter out” merely because it is exchanged for equally identifiable property or through the effluxion of time. Where there is clear documentary evidence of the transformation of an excluded asset into other identifiable property, the exclusion is preserved.”