May 18, 2018 | Share
What is a Reimbursement Claim in a Texas Divorce?
If you are preparing to go through a divorce, there are a variety of reasons why you may feel that you are entitled to reimbursement from your soon-to-be-former spouse. While Texas’s community property law largely focuses on distributing spouses’ jointly-owned assets based upon what is “just and right,” it also recognizes that there are circumstances in which one spouse may be entitled to reimbursement notwithstanding the fact that the reimbursement results in what would otherwise appear to be an inequitable distribution of community property.
Reimbursement in a Divorce: A Hypothetical Example
Let’s consider an example where the wife owned the family home prior to the date of marriage; and, during the marriage, both spouses used their community assets (i.e. their shared income) to make $50,000 in renovations. Since the wife’s ownership predated the marriage, the home would be considered her “separate property,” and this means that it would be hers to keep after the couple’s divorce.
But, this would also result in a windfall to the wife — she would get to keep the entire $50,000 worth of renovations even though, if the couple had purchased a car worth $50,000 with shared income, the car would be part of the couple’s community estate. The Texas Family Code recognizes that this is unfair, and it addresses this issue through the concept of reimbursement.
Reimbursement Under Texas Family Code Section 3.402
Under Section 3.402 of the Texas Family Code, reimbursement may be awarded during a divorce to address nine specific sets of circumstances:
- One spouse’s payment of the other’s unsecured liabilities;
- Inadequate compensation for one spouse’s work in his or her own private business;
- Reduction in principal of one spouse’s pre-existing secured debt during the marriage;
- Reduction in principal one spouse’s secured debt on property received by gift or inheritance during the marriage;
- Reduction in principal of a secured debt incurred during the marriage for purposes of buying or making capital improvements to property;
- Reduction in principal of a secured debt incurred during the marriage for which the creditor agreed to look solely to one spouse’s separate property for payment;
- Refinancing of any of the debts listed above resulting in reduction in principal as described;
- Capital improvements to property other than through financing; and,
- Reduction of community property due to payment of one spouse’s separate unsecured debt.
Non-Reimbursable Expenses Under Texas Family Code Section 3.409
While Section 3.402 of the Texas Family Code identifies the types of situations in which an award of reimbursement may be appropriate, Section 3.409 lists five specific types of expenses that are not eligible for reimbursement. These include:
- Child support and alimony payments to a former spouse or partner;
- Living expenses during the marriage;
- Contributions of property of a nominal value;
- Payment of a nominal liability; and,
- Payment of student loan debt.
All of the above rules are subject to the existence of a valid premarital or postmarital agreement. Like other aspects of Texas’s community property law, fiancés and spouses can agree in advance to override the default rules governing reimbursement claims in the event of a divorce.
Do You Have More Questions about Property Distribution or Reimbursement?
If you would like more information about Texas’s community property law or how the concept of reimbursement could play a role in your divorce, please contact us to discuss your situation in confidence. To speak with one of our McKinney family lawyers in a free, no-obligation consultation, call (214) 726-1450 or inquire online today.
Categories: Family Law & Divorce