Credits and Reimbursements
Credits and rights to reimbursement often surface during divorce litigation. During the divorce process, between the date of separation and trial, one or both spouses may have rights to reimbursements for post-separation payments made to benefit the community estate or the other spouse. Credits and reimbursements can also refer to charges that a spouse may be required to pay for his or her exclusive use and enjoyment of a community asset.
Watts Charges: Under California Family Code section 2550, the 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 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, under Marriage of Jeffries, any mortgage payments on that residence by the exclusive possessor will be deducted from the Watts charges imposed by the court.
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.
Epstein Credits: As a result of the California family law case Marriage of Epstein, courts 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. 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.
Keeping accurate records of any payments made that have a potential right to reimbursement is critical. The court will require proof of any payments made on community debts from separate property funds. Therefore, it is important to keep track of all transactions involving community debts and payments made towards them following separation.
If you are interested in a divorce from your spouse or legal separation we can provide you with information and guide you through your options. Our team of experienced attorneys is prepared to litigate on your behalf.
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