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Dividing assets may require reimbursement claims

| Jan 11, 2021 | Divorce, High-asset Divorce |

One of the most significant issues in any divorce involves the division of assets. Here in Texas, property or assets are categorized as community property (jointly owned by spouses) or as separate property (individually owned). Unless the couple has a prenuptial or postnuptial agreement in place, the couple divides the property with the stated goal of a “just and right” settlement. This does not mean splitting community property in half, nor does it require a 50/50 division of the estate according to values assigned to assets by the parties.

Part of this process involves identifying the property as either community or separate property. Separate property generally is property accumulated by the spouse before the marriage or via gift or inheritance. Couples typically accumulate community property during the union with the understanding that both spouses will own and use the property.

Reimbursement claims often used

It gets more complicated, however. One spouse may file a reimbursement claim to reclaim some community funds that were spent during the marriage on one or more separate properties. They could also file to reclaim separate funds put towards community property or the other spouse’s individual separate property.

When community funds go to separate properties

Here are some examples of how this applies includes:

  1. A home renovation or capital improvement after the marriage to a home or property that is individually owned
  2. Payment of a spouse’s individual unsecured debt using marital funds.
  3. Refinancing of any secured loan tied to an individual separate property

These reimbursement claims ask the spouse owning separate property which has benefited from community funds to repay the community estate. These claims should be made based on the premise of equity, fairness, and doing what is right. The claim’s goal is to prove a specific and provable value. The judge will then rule whether the claim is valid and attach a specific monetary value to the claim. The money would then be categorized as community property and be put back into the community estate which the Judge will then divide between the spouses at time of divorce.

Examples where individual funds go toward community property

It is also not unusual for a spouse’s separate property to, at some point, be used to benefit community property. For example, a spouse could use part of an inheritance to make mortgage payments for a house owned by both spouses. Perhaps it was a lean financial stretch for the couple, and the payments totaled $15,000. The inheriting spouse can claim a $15,000 reimbursement against the community estate, minus their portion of the payment.

What if no community property is involved?

If the other spouse owned the house, the inheritor spouse could claim the full amount of $15,000. Where one spouse uses a property separately owned by the other spouse for the non-owners sole and separate benefit, the owning spouse could ask that the Court offset the amount of the claim by the value of the offsetting benefit to the non-owner.

Several claims may be necessary

Each spouse may file several reimbursement claims as they untangle their property during the divorce. Rather than pay the money outright, the spouse may award a percentage of the property based on its value and the amount of money owed.

These complex issues need knowledgeable guidance

Those with questions about community property, individual property and reimbursement claims will often find it useful to speak with an experienced, Board-Certified Family Law expert attorney, who can explain these legal principles and how they relate to the specifics of the client’s divorce.

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