Reimbursement Claim: A Tool in Dividing Property at Divorce

As you have learned from reading our blogs, you know that property is not automatically divided 50-50 in a Texas divorce. The divorce court is instructed by statute to divide the property in a “just and right” manner. That means the court is supposed to put fairness front and center. A tool for doing that has evolved over the years is something called reimbursement claim. In most cases, there are three pools of assets presented at time of divorce: the community property; your separate property, and your spouse’s separate property. Typically, a lot of mixing and stirring of those pools will have taken place during marriage. Maybe you used your inheritance from Aunt Minnie on a big family vacation, or a wedding, or anything where there is nothing tangible now in existence for the court to deal with. Maybe you used some money you owned before marriage to pay off credit card debt your spouse ran up. Maybe a big chunk of your income earned during marriage went to pay off your spouse’s student loans incurred before you married. None of those examples rises to the level of a reimbursement claim. Sure, money you inherit is your separate property, but if you spend it and have nothing to show for it later but some pictures and nice memories, then it’s gone and it’s not coming back. You are trading your separate property for those pictures and memories, so make sure you enjoy yourself! You can’t take an equal amount of money out of the community estate, put it in an account in your name and claim that stands for the money you inherited from Aunt Minnie. You can never be reimbursed for money spent paying back your spouse’s student loans. Maybe that isn’t fair, but it’s the law, written in black in white in the statutes. Ideally, paying off your spouse’s credit card debt gave you some peace of mind, maybe even some joy in your marriage, because that’s all you will get for doing that. Okay, so what would be a viable reimbursement claim to your separate estate? First of all, you have to be ready to prove it was your separate property money – your exact money – used to enhance the value of something of owned by either the community estate or your spouse’s separate estate now that you are getting divorced. And, you have to prove that your money did actually enhance the value of the asset. It’s not enough to be able to prove that you spent your inheritance redoing the kitchen in the house owned by either the community estate or your spouse’s separate estate, you have to prove what the house is worth today with and without the kitchen redo, and that difference might be reimbursed to you. Years ago the Texas Supreme Court issued an opinion standing for the principle that reimbursement is not just a balancing of the ledgers, your dollar here, spouse’s dollar there, community dollar someplace else. It all depends on how those dollars have impacted the property in existence on the day you get divorced. It is all based on the concept of fairness, to avoid unjustly enriching one of those three estates (the two separate estates and the community estate) at the expense of another. As you might imagine, it’s a very long and winding road to get from here to there, and most people are not prepared with the evidence needed to make that trip. If you think of reimbursement as a tool for achieving equity, keep in mind it spends most of its time in the toolbox.