Epstein and Watts Credits in Divorce / by Cassandra Hearn

Once a couple separates, financial decisions can become more complicated.  Temporary spousal support, child support, joint bill payment, and other issues all need to be decided.  Epstein and Watts Credits are part of this process.  Epstein credits and Watts credits are two rules that resulted from two separate cases in California.  These credits are used in many California divorces and understanding them can help you plan for your separation and your future.

 Epstein credits arose out of a 1979 case called Marriage of Epstein.  With an Epstein credit, if one spouse pays marital debts after the separation using his or her own post-separation funds, then the paying spouse may receive reimbursement (or a credit) for one half of the debt from the other spouse.  This represents the amount that the other spouse should have been contributing toward a marital debt.  These credits may be used for a wide variety of debts or bills.  As with many other areas of the law, however, there are several exceptions.  If the spouses agreed that there will not be reimbursement or if the payment was intended as a gift, then the requesting spouse should not receive the credit.  Next, if the payment was made with the intention to discharge the child or spousal support obligation, then the seeking spouse will not be able to recover.  Finally, there may be some exceptions to receiving this type of credit when the credit is associated with the marital residence.  For example, if the requesting spouse is exclusively using the marital residence and has paid the mortgage while residing there, then a credit may not be appropriate.

 Watts credits also arose out of a divorce case.  Those credits came from case called Marriage of Watts, which was decided in 1985.  These credits are also sometimes called “Watts charges.”  Like Epstein credits, Watts credits may be applied to almost any marital asset that has real value, ranging from cars to real property.  For these credits, a requesting spouse asks for a “charge” against the spouse using the community asset after separation.  For a Watts credit, you look to the value of the use of the asset, such as rental value for a home.  As with Epstein credits, there are some exceptions.  They include: 1) if the parties had a different agreement; 2) if the use of the asset was intended as a gift; or 3) if the rental value of the community asset was already accounted for when determining spousal support.

 Epstein and Watts credits need the review of an experienced attorney.  We can help you review your case and determine what applies to you. Contact us today at 619-800-0384 if you are facing divorce or separation, and we can talk about your situation.