There are a number of different types of reimbursement that can be agreed upon or ordered by a court in a divorce. This can be in addition to what is decided as regards child support, spousal support and the division of assets and debts. Following are some of the more common reimbursement types and a basic explanation of the law concerning them. The law would come into play if a judge is asked to make decisions on reimbursement requests in a California divorce.
Education / training reimbursement
The marital community can be reimbursed for its contributions to education or training of a spouse that substantially enhances the spouse’s earning capacity.
Separate property contributions to the acquisition of community property
This is found in Family Code Section 2640 and is sometimes called a “2640 reimbursement.” A common example is a spouse’s separate property home that becomes the couple’s home. The spouse may have spent separate money before marriage making a down payment, paying for improvements and/or paying down the principal on the mortgage. Unless there is a written waiver of reimbursement, a judge must order this type of reimbursement to the extent the spouse can trace the contributions to a separate property source. Note that the law does not include reimbursement for payments for mortgage interest, property taxes and home insurance.
Sometimes a home as above is sold and another community property home is purchased with the proceeds. The spouse who made the original separate property contributions is still entitled to reimbursement, although tracing may be required.
Exclusive use of a community asset after separation
Sometimes after separation one spouse will have sole use of a community asset, such as the family home. In this situation a court can order the spouse using the home to reimburse the marital community for the value of this exclusive use. These are often referred to as “Watts charges.” If the spouse in the home is paying the mortgage, these payments can generally be used as an offset against the reimbursement.
Separate property used for community expenses after separation
Sometimes one spouse after separation continues to pay the mortgage on the family home or marital credit card debt out of that spouse’s separate property or earnings. Generally, the law says that a court should order reimbursement of the spouse’s separate property used in this way. These are often referred to as “Epstein credits.” There are exceptions such as when:
- The spouses have an agreement that there will not be reimbursement.
- The paying spouse intended the payments to be a gift.
- The payments constitute the paying spouse’s duty to provide support to the spouse or dependent children.
Community property used to pay separate obligations
An example would be using a community bank account to pay down credit card debt incurred by a spouse after separation. The law directs a judge to order reimbursement to the marital community from the spouse who benefited.
Separate property contributions to the other spouse’s separate property
These are not common but the law directs a judge to reimburse them.
Community property used to pay support from a prior relationship
The support could be child support or spousal support. The law says that a judge should order reimbursement to the community.
Most of the information above comes from California Judges Benchguide 202 – Property Characterization and Division.
The law in the area of reimbursements is fairly complex so it may be wise to consult a family law attorney with questions about your specific situation. Often it is not easy to convince the court that reimbursement would be appropriate. The costs of litigating claims can be substantial.
When couples work out their own divorce agreements, perhaps in a process of divorce mediation, reimbursement claims are not particularly common. This is often because the money spent is viewed as “water under the bridge.” But also many divorcing spouses are unaware of the possibility of reimbursement.