• Robert Tsai

Reimbursement and Fraud

Updated: Jun 19

Claims for reimbursement and fraud on the community aid the court in making division of property just and right. A claim for reimbursement arises when assets of one estate are used to benefit or enhance the assets of another estate without any benefit to the donating estate. A claim for fraud on the community functions similar to a claim for reimbursement, but arises when a spouse intends to deceive the other spouse, or actions of a spouse in managing community assets is unfair to the other spouse. Claims for fraud on the community are typically seen where one spouse gifts all or a portion of community property that he or she controls to a third party outside of the marriage, like children of a prior marriage.

Reimbursement is not a right; it falls within the discretion of the court. A spouse asserting a claim for reimbursement must provide clear and convincing evidence that (1) a contribution was made by one marital estate to another; (2) the contribution was reimbursable; and (3) the value of the contribution. A spouse may also assert a claim for reimbursement where a small business owning spouse received inadequate compensation for his or her time and effort put into the business. Additionally, if a spouse can prove that the other spouse’s time and effort were used to enhance separate property beyond that necessary to manage and preserve the property, the proving spouse can utilize a reimbursement claim to recover the reasonable value of that time and effort, albeit more difficult than other claims for reimbursement.

If fraud on the community is committed, the court will determine what the estate would have been valued at if the fraud had never taken place. This is called the “reconstituted estate.” With the full value of the community estate theoretically restored, the court will then perform the just and right division by considering all legal and equitable relief available to accomplish this.

If you need more information, contact us or call us today at 832-278-1995.

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