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Question: How do I handle reimbursement from marital property for the expenditure of separate assets for marital purposes (Epstein credits)?
Answer: This covers the situation where a party has spent separate funds for marital purposes.
And now that party is being reimbursed from the marital assets for that expenditure.
This can happen if, for example, post-separation income is used to pay marital debts.
In California, this reimbursement is known as "Epstein Credits."
If the property division is 50/50, the amount to be reimbursed is half of amount of separate funds spent to pay off the marital debt. (The other half was the spending party's own share of the marital debt.)
If the property division is other than 50/50, the amount to be reimbursed is the payer's % * amount spent. For example, if the payer is entitled to 60% of the assets, the amount to be reimbursed is 60% of the amount spent.)
You want to "set aside" for the payer spouse an equivalent amount of marital property.
What you do is to compute that amount and set your target percent to reflect it.
- Suppose Wife has paid $20,000 of her post-separation income to pay down marital credit card debt.
- Suppose total marital assets today, after debt payoff, are $80,000.
- Suppose it is going to be a 50/50 marital property division overall.
1. Wife is entitled to 50% of the $80,000 or $40,000.
2. In addition, wife is entitled to $10,000 as reimbursement for paying down the debt.
3. Wife's total entitlement, therefore, is $40,000 + $10,000 = $50,000.
4. Since there are $80,000 of assets now, wife should get $50,000/$80,000, or 62.5%.
5. Set the target percentage on the Equitable Distribution (Property Division) Worksheet to the 62.5%.
6. Divide the assets so that that 62.5 / 37.5 allocation is achieved, and Wife ends up with $50,000.
Note that we only allow whole numbers in the target percentages, but the calculations of results do allow decimal places.