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Right to Reimbursement in Texas Divorce

coupleIn McCoy v. McCoy, a Texas husband appealed from a divorce decree, arguing that the lower court should not have denied his claim for reimbursement. The couple started dating in 2009. In the following year, they got engaged, and the husband moved to start law school. His fiancée joined him there in a rental house. They married in 2011. The wife worked full time during the husband’s first year in law school but then started going to law school as well. They both relied on student loans to cover their expenses and tuition.

Later, the husband claimed they had an agreement that the wife would pay him $700 every month and also pay for groceries and gas. He argued that she budgeted poorly and only sometimes paid this part of the expenses, and as a result he had to get supplemental student loans to cover her portion. They kept separate checking accounts related to their different law school loans.

In 2013, after the husband graduated, the wife filed for divorce. The husband responded by claiming he was entitled to reimbursement from his wife because he’d had to use his separate property to pay for her necessary living expenses. A bench trial was conducted, and the trial court divided the marital estate by awarding each of them the property they possessed and by ordering each spouse to pay his or her loans and debts solely in his or her name. The trial court also found that the husband’s request for reimbursement wasn’t supported by a preponderance of the evidence.

The husband appealed. The wife sought an award of appellate attorney’s fees. Thirty days after the husband filed his notice of appeal, the trial court ordered the husband to pay the wife $8,000 for the appeal.

Among other things, on appeal, the husband argued that the trial court should not have denied his claim for the reimbursement of student loans he used to cover his wife’s living expenses. The appellate court explained that the claim failed for two reasons. It explained that reimbursement is a right that arises if the funds of one estate are used to benefit another estate without any benefit to itself under section 3.402 of the Family Code. Whoever claims reimbursement bears the burden of proving that payments were made and are reimbursable. The trial court has broad discretion when reviewing a reimbursement claim.

The husband’s reimbursement claim hinged on the idea that his student loans were his separate property, not community property, which is all property aside from separate property that either spouse acquires during the marriage. Property a spouse owns before marriage or property acquired by gift, descent, or devise during the marriage is separate property. Similarly, debts incurred during the marriage are presumptively community debt and are community obligations during the divorce unless a creditor agreed to look only at the spouse’s separate estate. It’s necessary to present clear and convincing evidence if you want to rebut the presumption.

In this case, the couple married in 2011, and the loans he secured were during the marriage. Therefore, they were community obligations, and the funds were community property. The husband argued they were separate property only because he kept them separately in his own bank account. This did not count as clear and convincing evidence that the loan proceeds were separate property. The husband had not shown that his claim was like any of the nine grounds for reimbursement put forward in Family Code section 3.402. Additionally, under section 3.409, courts are not allowed to recognize a marital estate’s claim for reimbursement for a spouse’s living expenses.

If you are considering divorce, and you’re concerned about reimbursement, contact the Texas attorneys at the McClure Law Group at 214.692.8200.

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Divorce and Taxes – What to do if your ex-spouse botched your joint tax return, May 31, 2016