During a divorce in California, when one spouse uses community property, they may be required to reimburse the other spouse for that use. Reimbursement should be considered before you finalize your divorce, especially if you are paying spousal or child support.
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Reimbursement
Reimbursement in a family law matter is the money one spouse or the community will receive from the other spouse for use of community assets or the the other spouse’s separate property.
Watts Charges
In California, one spouse is entitled to reimbursement when the other spouse uses community property after the date of separation, they may be ordered pay the other spouse a fee for using that property. This means that a wife may have to pay rent to their husband during divorce in order to live in the family home. Your husband may request up to half the rental value of the family home. If your home’s rental value is higher than your mortgage, you could lose money by staying in your home. The rental charges imposed on one spouse are known as “Watts Charges.”
Dividing Community Property
A trial court must divide the community estate equally between the parties upon divorce. In equalizing the division of the community estate, the judge may order one spouse to reimburse the community estate for the value of any exclusive use of any part of the community following the date of separation up until the date of trial. This means that if either spouse continued to live in the family residence while the other moved out following the separation, he or she may be required to reimburse the community for his or her exclusive use. However, the spouse with exclusive use of a community asset will not automatically be required to reimburse the community for his or her use. Instead, the judge will consider all of the circumstances of the case in order to determine whether it is fair, equitable and reasonable to require the spouse to make any payments. This gives the judge wide discretion to decide whether to apply the reimbursement on a case-by-case basis.
Exclusive Use of a Community Asset
When a spouse incurs Watts Charges for the exclusive beneficial use of community property, the money owed on that asset is known as a “Jeffries Reimbursement,” or a set-off for the payment of a community debt. Although one spouse is enjoying the use of a valuable jointly owned asset and should reimburse the community for that use, they are likewise paying a creditor for that use and that amount should be deducted from what that spouse owes to the community. While Watts is a calculation for the value of what should be charged for an exclusive enjoyment of community property by one spouse; Jeffries combines the value of that use with reimbursements under an Epstein analysis.
Epstein Credits
A trial court may reimburse one spouse who pays community debts, existing at the time of separation, with his or her own separate earnings or other separate property. This is called an “Epstein Credit.” Following separation, the earnings and accumulations of the spouses become their respective separate property. Between the date of marriage and the date of separation, these earnings are community property. This issue commonly appears when the couple accumulated credit card debt during the course of the marriage and one spouse continues paying the credit card bill with his or her own separate earnings following separation. Any payments on debt incurred by either party following the separation will not be eligible for reimbursement. Payment of community debts in lieu of payment of a child or spousal support obligation, could extinguish the right to Epstein credits. Epstein credits are generally viewed by trial judges to be mandatory reimbursements.
Other Reimbursements
A spouse is entitled to reimbursement for the following payments:
- Child support payments or spousal support payments made during marriage resulting from obligations arising from another relationship.
- Community property used to satisfy one spouse’s tort liability or student loan debt.
- Epstein Credit – reimbursement to spouse who uses his or her separate property to pay for preexisting community obligations after the parties’ date of separation.
- Watts Charges – reimbursement to one spouse who has a claim against the community for charges related to the other spouse’s use of an asset after separation.
- Frick Credit – the community has a right of reimbursement when a spouse uses community property to pay his/her separate property obligations.
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