After you separate from your spouse in California, determining how to pay your bills can be a bit confusing. The court has not yet divided your property between you or approved an agreement you arrived at yourselves, but your mortgage, car payment, credit card bills and all the other bills that are part of living your life still need to be paid. If just one of you pays some of these bills, you will want to discuss Epstein credits with your California family law attorney.
Since California is a community property state, you own half of the income and property acquired during your marriage (with some notable exceptions) and so does your spouse. You also have community debts. Therefore, if one of you pays a community debt after you are separated but before the trial, that spouse is due reimbursement for the other spouse’s share. In other words, an Epstein credit is a right to be reimbursed for one-half of the amount of separate property funds used after the date of separation, to pay a community debt.
This is known as an Epstein credit, and it’s named after the 1979 California family law case of In re Marriage of Epstein. California Family Code section 2626 does not codify all that decision, but its wording supports Epstein. The code section says, “The court has jurisdiction to order reimbursement in cases it deems appropriate for debts paid after separation but before trial.”
How Do Epstein Credits Work?
One spouse may end up paying some community property debts after separation but before the divorce trial for a variety of reasons. Let’s assume that one spouse makes more money than the other. The higher earning spouse continues to pay the mortgage as they did during the marriage. In some cases, the lower earning spouse may not even be able to afford to make payments toward the mortgage until such time as spousal support is ordered. At any rate, the spouse who is paying the mortgage can claim reimbursement. Paying for a community debt for any kind of property may make you eligible for Epstein credits.
Are Epstein Credits Automatic?
Epstein credits are not automatically granted, and the spouse seeking reimbursement must request it from the court and submit detailed evidence that they paid community debts. Should you fail to keep careful payment records, it is unlikely you will be reimbursed. Often, a higher earning spouse may request Epstein credits in response to a request for spousal support.
How Are Epstein Credits Calculated?
The first step in calculating Epstein credits is determining how much the requesting spouse paid for community property debts. Of course, this is assuming they paid these debts out of an individual rather than a joint account. Technically speaking, each spouse owes 50%. However, it’s not that easy.
Often, Epstein credits are offset by Watts Charges. Watts charges apply when only one person uses a piece of property such as the house after the separation but before the trial. Since both are entitled to the value of the use of the property, the spouse who enjoys full use owes the other spouse according to 50% of fair market value. So, say you pay for the entire mortgage, but you also continue to live in the house while your spouse moves to an apartment. The court may determine that it’s unfair to award either Watts charges or Epstein credits. This, of course, is a simplistic example, and the judge would weigh a variety of factors including the amount of the mortgage and the fair market value of renting the property.
Does the Court Have Discretion in Awarding Epstein Credits?
As with Watts charges, a judge has discretion in awarding Epstein credits and will consider a number of factors including:
- A previous agreement exists between the spouses that one will pay a debt without reimbursement.
- The payment was intended as a gift.
- The spouse who seeks reimbursement had sole use of the property…
- The spouse made the payment as a form of fulfilling a spousal support or child support obligation.
Call Ghazi Law Group for a Consultation
A court will weigh many factors when determining Epstein credits and Watts charges. The issues are complicated, and the amount of money involved may be substantial. Don’t gamble on your future. Contact our experienced Sherman Oaks family law attorneys at Ghazi Law Group for a consultation (818) 839-6644 or email us at firstname.lastname@example.org to schedule an appointment. We are located in Sherman Oaks, California, close to Encino, Woodland Hills, Studio City and other areas of Los Angeles County.