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Reimbursement Claims Against Separate Property

1. What are Reimbursement Claims?

A “Reimbursement Claim” is an attempt to obtain money back that was improperly spent or transferred during the marriage. This can take several forms, and the proof of it in a courtroom is difficult and it is ultimately up to the Judge whether to grant it.

Be sure to read our Ultimate Guide to Texas Marital Property Law for all of the information you need on this complex and important topic.

2. Wilma & Harry: An Example

Wilma and Harry were happily married for 20 years. Then things went downhill as they began to grow apart. Their children were almost adults. Manny was 17 and Matthew was 16 and they were already looking at colleges. Wilma and Harry no longer had the children as an excuse to stay together.

Even though Wilma’s new hobbies now included activities such as exercising and dancing, Harry had kept the same hobbies: hunting and reading. Wilma was changing and Harry had remained the same. Harry was now retired while Wilma worked long hours as a nurse. Though Wilma and Harry were still friends, they knew that a divorce was not only inevitable but also necessary.

When Wilma and Harry sat down together and discussed getting divorced, many questions arose. Harry had used money that he inherited from his mother to pay $102,000 down on the home they had bought together 10 years ago. Wilma had saved nearly $75,000 from gifts received from her father from before and after her marriage to Harry; she’d placed all of it in her and Harry’s joint checking account. She’d spent $555,000 on renovations for the home that they’d purchased after the marriage. At the time, she thought nothing of it.

Is this property separate property or is it possible that it has mutated into something else? Would Wilma and/or Harry be entitled to a reimbursement claim against separate property? In other words, would Wilma and/or Harry be able to recover any of the separate property for which they have voluntarily (even if unintentionally) commingled/mixed?

3. How to Win a Reimbursement Claim

When parties cannot reach an agreement regarding how their assets should be divided, a Court will make that decision instead. Most divorces settle their property division at Mediation, but about 5% go to Trial.

Step 1 – Complete an Inventory

The first step in dividing property in Texas is to identify all of the parties’ assets and liabilities in a Sworn Inventory & Appraisement and during Discovery. Courts require that parties exchange a property inventory prior to a trial. Each spouse tallies up all of the assets in both their own and their spouse’s name and list each asset and their approximate value. This could be anything from stock and retirement accounts to pets and personal property. In most cases, parties, with the help of their attorneys, will format the property inventory in a spreadsheet. Typically, multiple rows will give a description of the asset and/or liability (e.g. the name and last four digits of any account number). Example : Chase Bank Checking *6464 = $54,723. Each column, on the other hand, will show the value, list the dates that the value was established as that, and even list which property (and what portion) should go to each spouse.

Step 2 – Identify Your Community Property and List it

After assets have been listed on the inventory, the next step would be to identify all of the community property. This can be accomplished by identifying all property that was acquired during the course of the marriage and listing it in a “community value” column. Under Texas law, there is something called the “community out first rule” of which essentially states that if there is property that has been mixed/commingled, etc. the community property values should be determined first.

Step 3 – Identify Your Separate Property and List it

After all of the community property has been identified and listed, the next step would be to identify any separate property owned by either or both parties. Just as the parties are required to provide an adequate description of the community assets, the separate property is no exception. Any separate property must be listed with the name of the asset (e.g. Infidelity Retirement Account) as well as any other helpful identifying information (e.g. Fidelity IRA *8822 with a value of $234,555).

Step 4 – List any Wasting/Reimbursement Claims in a Row

One of the final steps that you will complete will be to list any wasting and/or reimbursement claims that you may have. This is where Harry would list the money he used from his separate property for the down payment on the marital home. Wilma would list her reimbursement claim for the gift money she’d received from her father that had been spent to renovate their home.

Step 5 – Proposed Property Division – Decide Who Gets What

After the above steps have been completed, it is time to have a serious discussion with your attorney regarding what property you would like to keep and which property you would be willing to divide and/or part with. Then, you will either move the entire asset’s value to that spouse’s column or if an asset is going to be split, you would put a portion of the asset in each of the spouse’s columns.

Your inventory may look something like this:

Community Value
To Wife
To Husband
Real Property
1234 Wilson Rd. Austin, Texas
Mortgage *0981 ($87,000)
$349,000
$349,000
Cash & Accounts w/ Financial Institutions
Chase Bank *4455 (H)
$10,000
$0
$10,000
Bank of America *7777 (W)
$3,000
$3,000
$0
Retirement Benefits
Fidelity 401(k) *8266
$230,000
$115,000
$115,000
Motor Vehicles, Boats
2010 WG Explorer GT
(KBB Value)
$12,000
$12,000
$0
2002 WG Motorcycle
(KBB Value)
$8,000
$0
$8,000
Liabilities
Jake Gilbreath Credit Card *9-1145
(-2,000)
($2,000)
Attorney Fees
Attorney Fees of Wife
TBD
X
Attorney Fees of Husband
TBD
X
TOTAL LIABILITIES
Separate Property of Wife
Gift Money Received from Father (*Spent on home rennovations)
$65,000
$65,000
Separate Property of Husband
Inheritance from H’s Mother (Spent on Down Payment for Home)
$102,000
$102,000
Reimbursement Claims of Wife
-15,000
$15,000
Reimbursement Claims of Husband
-22,000
$22,000

4. Divestment of Separate Property

A Court cannot award your Separate Property to your spouse. However, it is your burden to prove Separate Property. This is a difficult burden, known as ‘clear and convincing evidence’. It is not as simple as “I owned it before the marriage”. If you have significant Separate Property and your spouse is contesting it, be sure to inform your attorney and provide them the information they need to protect it.

5. Community Property Presumption

Texas is a bit special with how marital property is not only viewed, but treated. You’ve probably have heard that Texas is a “community property” state, but what does that really mean? Put simply, Texas law is designed in a way to assume that all property owned/acquired during the marriage is community property. All community property is subject to being awarded to one and/or both spouses. So, when a spouse has separate property, that will also be characterized as community property without the adequate proof that it anything other than that.

6. Proof in Court

“So you’re armed with not only an accounting of your assets, you’ve also identified all of your separate property. What next? Will your mere testimony be enough to prove your separate property with “clear and convincing evidence”?

Your mere testimony won’t be enough to prove that an asset is your separate property, and even though your inventory is required by most Texas courts in some form, and is certainly helpful to the Court, the inventory won’t be enough either. You’ll need supporting documentation to support those values that you’ve placed in each column and/or row, especially when you have a reimbursement claim against separate property. Additionally, you’ll need to provide supporting evidence that you are entitled to reimbursement.

In our above example first, Wilma would need to gather documentation that supports that she has received $15,000. Imagine that the gifts received from her father had been in the form of checks. Wilma could provide copies of those checks.

Next, Wilma should attempt to provide some supporting evidence that the money from her father was a gift. If her father could testify to this in Court or if her father had indicated the words, “gift” for example on the checks, this evidence could certainly be useful.

Then, Wilma should provide documentation which could show that she mixed this money with community property (she and Harry’s joint bank account) . Wilma could simple provide bank statements and/or other records which reflect this.

Lastly, she’d need to show some type of proof that she paid $15,000 in renovations for the home. For our purposes, let’s say that Wilma still had her $15,000 invoice which indicated, “renovations for House located at 1234 Wilson, Rd. Austin, Texas” along with the date of purchase. Clearly, this would be a great piece of evidence to present to the Court by proving that:

  • The asset’s value is what you say it is;
  • The asset is your separate property; and;
  • You have used separate property funds to pay for community (i.e. joint) expenses,

then the Court may “reimburse” your separate estate with money from the community estate, if it exists.

With this in mind, we know that addressing these issues can be exhausting. It can stress you out. This is likely the first time in your life that you have had to dig this deep into the past, into your records, to prove that something belongs to you. Going through a divorce is usually draining to an extent on the spouses. As such, we recommend that you hire a family law attorney that has experience in reimbursement claims in Texas divorces. Your attorney can guide you and even help you gather the evidence that you’ll need.

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