Reimbursing a Spouse for Contributions to Separate Property in Texas

 Posted on July 09, 2021 in Complex Property Litigation

When a couple’s assets are divided in a Texas divorce, there is an important distinction between community property and separate property. Community property refers to most assets acquired by one or both spouses during their marriage, and both spouses have a claim to it in the divorce. Separate property refers to assets that belong to just one spouse, usually those that were acquired before the marriage.

Though your spouse does not have a claim to a portion of your separate property during the divorce process, this property can still impact the terms of your divorce resolution in other ways. For example, you may need to prepare for your spouse to claim reimbursement for any contributions they made.

When Can a Spouse Claim Reimbursement?

According to Texas law, there are several situations in which a spouse may have a claim for reimbursement for contributions made to the other spouse’s separate property. Some of the most common include:

• Repayment of debt - If your spouse has made payments toward your separate debt (e.g., a loan you took out before your marriage), or if you have used funds from the marital estate to repay the debt, you may be expected to reimburse those contributions.
• Investment in capital improvements - Similarly, you may be expected to reimburse your spouse or the marital estate for funds used to make improvements to your separate property that tangibly increased its value. For example, your spouse may have provided funds for a remodel or addition to a vacation or rental property.
• Contributions of labor or effort - Your spouse may claim reimbursement for “time, toil, talent, and effort” that they contributed to your separate business property.

If the reimbursement claim is for your spouse’s effort or for funds contributed from your spouse’s separate property, you will likely need to reimburse them directly. If the claim is for funds contributed from the marital estate, you will instead need to reimburse the estate, and these funds will be distributed along with the rest of your community property.

Responding to a Claim for Reimbursement

If your spouse makes a claim for reimbursement, they are responsible for demonstrating to the court that reimbursement is warranted. You may be able to contest or offset your spouse’s claim by demonstrating one of the following:

• Your spouse already received appropriate financial compensation for their contributions.
• Your spouse benefited from the use or enjoyment of the property they made contributions to.
• Your spouse also owes you reimbursement for contributions you made to their separate property.

Contact a Texas Property Division Lawyer

The process of fairly distributing assets during a Texas divorce can be extremely complicated, especially when there are claims for reimbursement. At Powers Kerr & Rashidi, PLLC, we can help you protect your property and your financial interests as you work to resolve your divorce. Call us today at 512-610-6199 to speak with an experienced Austin, TX divorce attorney.

Source:

https://statutes.capitol.texas.gov/Docs/FA/htm/FA.3.htm