Reimbursement Claims-Part 2: Offsets

This is the second post in a three-part series on “reimbursement claims” in divorce.  In Part 1, wife established a reimbursement claim on behalf of the community estate for the reduction in the principal amount of debt on husband’s separate property home that accrued during 10 years of marriage.  In Part 1, we determined that the mortgage principal had been reduced by $60,000.  Here, we’ll examine the effect of the husband’s “offsetting” reimbursement claim for the benefit his separate property home conferred on the community.

For simplicity, let’s assume that husband and wife filed a joint Federal income tax return during each year of marriage.  An examination of those tax returns revealed that the community’s tax liability had been reduced by $40,000 by virtue of claiming the mortgage interest and property tax paid on husband’s separate property home among the couple’s itemized deductions.  Thus, husband’s separate property estate (i.e. his home) conferred a benefit on the community estate (i.e. reduction in the spouses’ tax liability).  Does husband’s offsetting claim automatically reduce wife’s reimbursement claim on behalf of the community to $20,000?  Not necessarily.

Courts are not required to offset reimbursement claims on a dollar-for-dollar basis.  As the court in Pennick said, evaluating equitable claims for reimbursement “is not merely a balancing of the ledgers” between the spouses’ separate and community estates.  As in all “equitable” matters, courts have wide discretion to effect a “just and right” division based on all the factors at play in each parties’ divorce.

Author Jim Cramp is the founder and principal attorney at the Cramp Law Firm.  The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region.  This blog cites Penick v. Penick, 783 S.W.2d 194 (Tex. 1988).