You may not have heard of Epstein or Watts credits, and this lack of knowledge could be hurting you. It is important to understand what they are, determine if you are eligible for them, and claim them if you are eligible. Although property division incident to a divorce is often a dizzyingly complex matter, that fact doesn’t have to work to your disadvantage.

Epstein Credits

Suppose you and your spouse separate, and after separation you pay the full amount of the mortgage on your home even though the debt belongs to both of you on a 50/50 basis. You are entitled to reimbursement for half the mortgage payment – that is what an Epstein credit is. It also applies to other community debts such as credit card debts.

Exceptions

A number of exceptions apply to the award of Epstein credits, including:

  • A valid agreement between the spouses forbids this credit;

  • The payment was intended as a gift from one spouse to the other; or

  • The payment has already been credited towards the paying spouse’s child support or alimony obligations.

Watts Credits

Suppose you separate and move out of the family home. However, your spouse remains, giving him exclusive use of the home that belongs to both of you. You are entitled to half the fair market value of the use of the home. That is what a Watts credit is. Like the Epstein credit, it also applies to other community property such as a car.

Exceptions

Exceptions to the award of Watts credits include:

  • A valid agreement between the spouses forbids this credit;

  • The use of the asset was intended as a gift from one spouse to the other; or

  • The fair rental value has already been credited towards the non-using spouse’s alimony obligations.

Offsets

Epstein and Watts credits can be set off against each other. Suppose, for example, that you pay the entire mortgage on your community property home after separation. That may entitle you to an Epstein credit. Further suppose that you live at the property after separation, but your spouse moves out. That would entitled him to a Watts credit.

These two credits may be set off against each other. The balance may not be zero, however, because the amount of the mortgage payment might be different from the fair market value of the use of the house.

Notes on Proving It in Court

  • To prove an Epstein credit, It is important that you document any payment (such as a mortgage payment) out of your personal funds. This CANNOT be from co-mingled assets that belong partly to your spouse such as a community property bank account.

  • You will need to prove the fair market value of the use of the asset with an expert witness such as a real estate appraiser.

We Can Help Guide You through the California Family Court Maze

It is easy to become overwhelmed during the emotional turbulence of a divorce. Fear not. At CKB Vienna, our lawyers handle a wide range of family law issues, including complex property division matters. Our clients hail from all overUpland, Fontana, Ontario, Chino Hills, Claremont, Rancho Cucamonga, including Alta Loma and Etiwanda. Call us at 909-980-1040 or contact us online to inquire about the services we offer.

Comment