As a customary rule, courts may reimburse a spouse if that spouse used post-separation earnings or other separate funds subsequent to separation to pay for pre-existing community debt obligations. The Courts are not bound to order repayment, however, if the payments were in lieu of support or if temporary support was adjusted because of court-ordered payment of obligations. In addition, should the payment be made by a spouse for an asset the paying spouse had or is currently using and the amount was not substantially beyond the value of that use, the Court may decline reimbursement.
Based on the factors outlined above, reimbursement for payment of community property obligations is more of a support, than property issue. Therefore, the time to decide what reimbursement will be allowed should be at the temporary support stage, rather than during final settlement or trial.
California courts require Epstein claims to be presented via declaration. All facts that support the community nature of the obligation must be contained in the declaration, including:
- The balance of the obligation at the date of separation
- Dates and amounts of the post-separation payments made
- The source of the payment, which must be separate property, and
- Copies of all documents that support the claim
It is essential to make sure all supporting documents are attached to the declaration, as only those that are attached are permitted as evidence. For cases that go to trial, Epstein declarations are considered evidence in lieu of the claimant’s testimony and are subject to cross-examination. The declarations and substantiative documents must be served on the opposing party at least five days prior to the settlement conference or at least five days before trial, if they were not presented at a prior settlement conference.
Resolve Epstein issues prior to the date when temporary support is set. If you do not and the case goes to trial, you will be exposing your client to an unpredictable trial decision and an increase in litigation fees due to the complex issue of Epstein credit issues.
Include a statement in the temporary support order that articulates whether a party will receive credit in the property division for separate payments on the list of community debts.
Remember that the party contending Epstein credits has the burden of proof concerning the community nature of the obligation, balance on separation, post-support payment and the source of the separate property payment.
Be aware that if the case’s condition on which the support order is based is quiet concerning Epstein obligations, the Court will assume payments on such obligations are not in lieu of support.
As a reminder, issues concerning property division of assets, assignment of debts and claims for reimbursement are complicated matters that require strategy and an aggressive stance. Consulting with a Forensic Accountant may help you achieve the outcome your client desires.