Charges, Credits And Rights To Reimbursement Overview
Under What Circumstances Are Reimbursements Granted To A Party In A Divorce?
Reimbursements in California divorces are determined by specific statutes and case law. Reimbursements are not granted based upon a sense of fairness. Fairness alone is not the determining factor, although fairness is inherent in the logic relied upon in many cases and statutes. If a right to reimbursement is not provided for in a statute or in a case, it cannot be granted by the family law courts.
There are a number of exceptions, nuances and gray areas in this area of the law. Reimbursements and credits may require determining:
- When the money was spent
- Who spent the money
- For what was the money used
- Whether the asset acquired still exists
- Whether any money spent on an asset caused the asset’s value to increase
- Whether the money spent was on a community or separate
- Whether the expenditure was a misappropriation or a breach of fiduciary duty
- Whether an asset was used by one party after separation
- What was the value of the use
A spouse may receive credit for using separate property funds to pay community debts post-date of separation unless the payment was:
- A gift
- In lieu of support
- There was an agreement to the contrary
- Paying spouse was using the underlying asset (e.g. a vehicle)
A party may be charged relative to misappropriation of community funds.
A party may be charged a penalty for breaching a fiduciary duty. This penalty may equal to 100% of the value of the non-disclosed asset.
Pereira* / Van Camp*
If a separate property business increases in value during the marriage, the community may be reimbursed a portion of the increase. This is a right to reimbursement and not a right to ownership. A party does not acquire an interest in the other party’s separate property business during the marriage unless there has been a transmutation of that interest.
A party may be charged for the use of real property, other tangible assets, liquid funds, a business or any other asset after the date of separation. In other words, a party may have to pay the community a fair rental value for living in the family residence after the date of separation.
Family Law Code Section 2640
A spouse may receive reimbursement for separate property contributions to the acquisition of community property. For example, a party is reimbursed for the equity that existed in a separate property home on the date they placed the other party’s name on title unless there was a written waiver of that right. A right to reimbursement may exist when one party uses their separate property to acquire property in the name of the other party.
Pereira* / Van Camp*
The community may be reimbursed relative to a portion of the increase in value of a separate property business during the marriage of a separate property business. This is a right to reimbursement and not a right to ownership.
*Based on California family law cases