As we covered in a prior post, when a married Texas couple divorces, all their property must be categorized as either community property or separate property. Community property can be divided between the spouses, but separate property of one spouse cannot. However, once that categorization is complete, there are additional issues the divorcing spouses must consider.
Reimbursement
One of those issues is whether they have a claim for reimbursement. A reimbursement claim may exist when the funds or assets of one estate are used to benefit and enhance the other estate without receiving any benefit.
For example, assume one spouse owns a home prior to the marriage. Once married, the couple lives in the home. They use both their incomes (community property) to pay the mortgage and maintain the house but never do anything that would convert the house from separate property into community property. When the hypothetical spouses divorce, that house will remain the separate property of the original-owner spouse. But because they spent community property funds on one spouse’s separate property, the community estate now has a reimbursement claim for that money. A reimbursement claim can also arise in the reverse situation - when a spouse expends their separate property funds to maintain or improve community property.
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.
Fraud On the Community
If one spouse unfairly or improperly disposes of community property, the other spouse may have a claim for fraud on the community. There are two types of these claims: “constructive fraud,” where a spouse makes secret or unauthorized transfers of community property, and “actual fraud,” in which a spouse makes misrepresentations or lies to the other spouse about community property.
If a spouse can show the other committed fraud on the community, a court must next determine the value by which the community estate was depleted as a result of the fraud. This new value of the estate, called the “reconstituted estate,” is then divided between the spouses in a just and right manner. In so doing, a court can take a number of approaches to compensate for the fraud, including awarding more of the community estate to the wronged spouse, awarding the wronged spouse a money judgment against the other spouse, or a combination of both approaches.
Both claims for reimbursement and fraud on the estate are common in Texas divorces. If you are contemplating or going through a divorce, you’ll need an experienced family law attorney to help you evaluate these claims and make sure you get what you’re owed. You need Robert Tsai. Click here to schedule a consultation today, or call us at 832-278-1995.