Tutorial video in a series of DIY divorce videos explaining about Watts Charges, Epstein Credits, Family Code 2640 reimbursements, and other claims that can be made during a divorce in California. If you or your spouse used separate property during the marriage to purchase a community property asset or improve a community property asset, then there may be a valid reimbursement claim under the provisions of Family Code section 2640.
When one party uses their separate property to do any of the following, there can be a reimbursement claim: 1) Purchase a community property asset, including making a down payment; 2) Paying for an improvement to a community property asset; or 3) Reducing the principal of a loan that was used to purchase or improve a community property asset.
In regard to mortgage payments, Your reimbursement claim is limited to the amount that the loan principal is paid down. You don’t get any reimbursement for payment of the interest portion of the mortgage, which is typically the bulk of the payment. If your mortgage payment includes impounds for property taxes or home owners insurance premiums, you don’t have a reimbursement claim for payment of property taxes or insurance. Just payment of principal.
The amount of the reimbursement is without interest and without adjustment for any increase in the monetary value of the asset.
Family Code 2640 also provides for a right of reimbursement if one party uses their separate property to acquire or improve the other party’s separate property.
If you claim you used your separate property funds to acquire or improve a community asset, the burden of proof is on you to produce evidence that traces the use of your separate property to the purchase or improvement of the community asset.
After you and your spouse separate, one or both of you may use your separate property funds, such as your post-separation earnings, to pay all or part of community debts. If so, a reimbursement claim for “Epstein Credits” can be made. The party that pays the community bills after the parties separate will be entitled to Epstein Credits.
If the payments were made in lieu of support payments, then the court may deny all or part of the Epstein Credits.
If you use your separate funds to pay community debts after you and your spouse separate, it is very important to document your payments. Get a binder. Every time you make a payment on a community debt, make a copy of the bill you paid and a copy of the check you used to make the payment. Put the copies in the binder. You will need these documents to prove your Epstein Credit claims later on at trial.
After you and your spouse separate, one party may make use of a community property asset and the use of that asset may have a significant rental value. The party using the asset may be subject to a Watts Charge, in which event, they would owe the community estate an amount equal to the fair rental value of the community asset they used.
Watts Charges can apply to the use of any community asset that has a significant rental value. The concept of Watts Charges could apply to one party’s post-separation use of the family home or the use of a community property car.
Some courts have local rules regarding Watts Charges that require you to give written notice to the other party of your intent to seek Watts Charges so the other party is not surprised at the time of trial.
If community funds were used to pay one party’s separate debts, there can be a right of reimbursement.
If community funds were used to pay for one party's education or training, there may be a right of reimbursement.
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