How is Reimbursement for Payment of Community Property Debts Post Date of Separation Calculated in San Diego Superior Court in 2014 for a Divorce or Legal Separation?
The leading case for reimbursement for payment of community property obligations after separation with separate property funds is Epstein. This case recognized the public policy need to encourage both spouses, after separation, to pay community property obligations. The purpose of this is to minimize the impact of separation the parties' credit rating and their creditors. Epstein recognized, the rationale for presuming a gift was gone after the parties separated and created law which is still recognized to this day. The rule, generally, when a spouse uses separate property, either from their separate property accounts or from their post separation earnings, to satisfy community property obligations, that reimbursement would be permitted in the final division of community property. It is very important to create a tracing of the payments since it is the duty of the spouse claiming this reimbursement to document the separate property payments.WHEN IS REIMBURSEMENT NOT PERMITTED?
Reimbursement is not permitted in the below factual situations.
- The payment was made under circumstances in which reimbursement would be an unrealistic expectation
- The spouses agreed there would be no reimbursement;
- The spouse who is paying truly intended the payment to be a gift;
- The payment was for a debt related to an asset that the paying spouse is using. The amount of the payment cannot be substantially in excess of the value of the use of the asset.
- The payment is in the nature of support for a dependent child of the parties or a spouse.
- When support [temporary] was adjusted because of payment of obligations which were court ordered.
Reimbursement for payment of community property obligations is generally considered to be more in line with a support issue than a property issue. As such, the appropriate time to decide what reimbursement will be ordered should be at the temporary support stage. The proper method to assign credits in the division of property is as follows: reduce the amount of community property charged to the spouse who paid the obligation by the by full amount of credit before the equalizing payment is calculated. As to the amount of the reimbursement, as the reimbursement comes from the community property, this should be a 50% credit and not 100% credit since each spouse owes 50% of the debt which is being paid.WHAT IS THE LAW WHEN COMMUNITY FUNDS ARE USED TO PAY COMMUNITY DEBTS POST SEPARATION?
If community property funds are used to pay community property debts after the date of separation, then there is no reimbursement since it is community paying community. This is why it is very important to have a complete tracing so that a determination can be made whether there is a right to reimbursement.HOW CAN A SAN DIEGO LOCAL LAW FIRM HELP?
The law firm of Doppelt and Forney, APLC can assist with reimbursement requests as well as other family law issues. Please feel free to schedule a consultation up to 30 minutes with no charge to discuss your family law case. There is no substitute for an experienced attorney to try and obtain your goals and to protect your legal rights.