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Marital Property and Reimbursement
March 12, 2015

Drawing pad with the word divorce written on it and a broken red heart.Before we can understand reimbursement, we need to understand how the law views marital property in Texas. Texas is a community property state, which means that property is either considered community property or separate property. Separate property is any property owned or claimed before marriage. Separate property also includes property inherited or received as a gift during marriage. Finally, separate property also includes any recovery for personal injuries sustained during marriage, excluding recovery for loss of earning capacity. Community property is any property acquired during marriage that is not separate property. A divorce court divides community property between spouses during divorce, but a divorce court cannot divide a spouse's separate property.

When a person comes into a marriage with separate property, they could be opening themselves up to a claim for reimbursement. Reimbursement is a claim one spouse can make against the other during divorce. Generally, a reimbursement claim is available when community property funds are used to the benefit of a spouse's separate property. Less often but equally as valid, a reimbursement claim can also exist when a spouse's separate property is used to the benefit of community property or the other spouse's separate property. As you can see, a reimbursement claim basically asks back any money spent by one kind of marital property on another.

Let's use Jack and Jill to demonstrate one of the most common claims for reimbursement. Jill bought a vacation house in 2007 for $300,000.00 with $100,000.00 down and a $200,000.00 mortgage. In 2009, Jill married Jack. When Jill married Jack, Jill still owed $160,000.00 on her mortgage. Jill filed for divorce against Jack on January 2, 2015. Over the course of their marriage, Jack and Jill used their earnings to pay off $100,000.00 of the mortgage. Jack and Jill's earnings during marriage are community property. Jill's vacation home is Jill's separate property because Jill bought the home before she married Jack. This means Jack can claim reimbursement on behalf of his and Jill's community estate for the $100,000.00 in community property funds used to pay off the mortgage on Jill's vacation home. In practical terms, this means Jack may end up getting an extra $50,000.00 when dividing the community property.

Why is this fair? Because Jack can't get Jill's vacation home in the divorce. A divorce court in Texas can't split up separate property, only community property. So Jack and Jill spent $100K of community funds paying off a loan on Jill's separate property. That only benefits Jill and would leave Jack in a lurch if he didn't have the option to seek reimbursement. So how would Jack get that extra $50,000.00? The easiest way is to give Jack a $50K head start when dividing the couple's community property. But what if there isn't even $50K of community property? In that case, the court can order Jill to pay back the $50K to Jack over time and give Jack a lien on Jill's vacation home to secure the debt.

What defenses would Jill have against the community estate's reimbursement claim? Normally, there are only two defenses to a reimbursement claim. First, that it's not fair to allow reimbursement in a particular situation. That's a very broad defense and entirely up to the court. Second, that the reimbursement claim should be offset by another estate's reimbursement claim or because the estate claiming reimbursement enjoyed the benefits of the asset. However, unfortunately for Jill, there is an exception to the offset defense in the Texas Family Code. A separate estate that owns a primary or secondary home can't assert a defense of offset against a reimbursement claim made by the community estate.

The above example is only one of many situations that can lead to a claim for reimbursement during divorce. Section 3.402(a)(1)-(9) of the Texas Family Code lists the general categories of situations that justify a claim for reimbursement.

If you believe you have a reimbursement claim against your spouse and need assistance with a divorce, contact Sugar Land divorce attorney Chikeersha Puvvada at 832-317-6705 or online today to schedule a free 30 minute consultation.

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