New Rule Makes Reimbursements Simpler and Fairer in Texas Divorce Cases
HB 1547 is now in effect in the state of Texas. We first offered a simplified guide to Texas’ new marital reimbursement law in August, but now that the law is fully in effect, let’s take a deeper dive into this new rule that makes reimbursements simpler and fairer when it comes to property division in the context of divorce. If you are going through a divorce in Texas and dealing with complex property division issues such as a claim for reimbursement from the community estate, you’ll want expert legal guidance from a skilled and knowledgeable family law attorney. In Harris County, contact the Law Office of Maria Lowry to discuss your case with our experienced Houston divorce lawyer.
Reimbursement Claims Explained
Dividing up property in a Texas divorce can be complex. Judges have the authority to distribute the couple’s community property in a way the court decides is “just and right,” but the process can get complicated quickly, especially when one spouse’s separate property was used to benefit the community property, or when community funds were used to benefit one spouse’s separate property. In these situations, one party might seek reimbursement from the other during the property settlement process.
For instance, let’s say one of the spouses owns land as separate property, but then community funds are used to build a house on the land. The house takes the character of the land, so the house is separate property. In a divorce, the spouse who doesn’t own the house (or the land) could be entitled to reimbursement for their portion of community funds that went toward building the house.
A similar situation is when a married couple moves into a house owned by one of the spouses as separate property. The house retains its character as separate property, but over time community funds are put toward improvements that increase the value of the house. In a divorce, the contributing spouse would have a claim for reimbursement of the portion of community funds that went toward improvements on the separate property house.
Reimbursement claims are heard in court as equity claims. In other words, how these claims are handled is up to the judge, utilizing principles of fairness based on the facts of the case.
In Steps HB 1547
House Bill 1547 was introduced to the Texas legislature on January 24, 2023. It was sent to the Governor on May 22 and signed on June 9. According to its terms, the law became effective September 1. This law makes several significant changes when it comes to reimbursement claims in a divorce.
The law begins by creating a couple of new legal terms in the law when discussing claims for reimbursement between marital estates. Now when speaking of reimbursement claims, lawyers and judges will refer to the “benefited estate” and the “conferring estate.” These terms are defined in the law as follows:
- “Benefited estate” means a marital estate that receives a benefit from another marital estate.
- “Conferring estate” means a marital estate that confers a benefit on another marital estate.
Next, HB 1547 comes right out and says it:
“A claim for reimbursement exists when one or both spouses use property of one marital estate to confer on the property of another marital estate a benefit which, if not repaid, would result in unjust enrichment to the benefited estate.”
In adopting this concise yet general statement, the bill does away with paragraph upon paragraph of specific examples of reimbursement claims outlined in the old law. The upshot of this change is that while the law now provides parties with less exact guidance, it potentially broadens the field of what might count as a claim for reimbursement.
The newly enacted law next describes what a spouse seeking reimbursement must prove:
that the spouse or spouses used property of the marital estate to confer a benefit on the property of another martial estate;
the value of the benefit;
that unjust enrichment of the benefitted estate will occur if the benefited estate is not required to reimburse the conferring estate. This last aspect is a matter for the court to decide, according to the new law.
To its credit, HB 1547 next provides guidance on when the property of a marital estate can be said to confer a benefit on another marital estate. The estate confers a benefit in any of the following instances:
Property of the conferring estate was used to pay a debt, liability, or expense that in equity and good conscience should have been paid from the benefited estate;
Property of the conferring estate was used to make improvements on the benefited estate’s real property, which enhanced its value; or
One or both spouses used time, toil, talent, or effort to enhance the value of property of a spouse’s separate estate beyond that which was reasonably necessary to manage and preserve the spouse’s separate property, and for which the community marital estate did not receive adequate compensation.
“Equity and good conscience” is not defined in the law. Presumably, this will be a matter left to the decision of the judge or jury deciding the facts of the case based on the evidence and testimony presented and the arguments made by the attorneys at trial.
Contact the Law Office of Maria Lowry for Help With Reimbursement Claims and Complex Property Division in Your Houston Divorce
If you need help pursuing or challenging a reimbursement claim, or if you are encountering other complex issues in your Texas divorce, the Law Office of Maria Lowry in Houston is here to help. Call 713-850-8859 to share your concerns, discuss your needs, and describe your goals that we can achieve together.