The comment I often hear from many of my divorce clients is, “Well, I want to stay in the house.”  This is completely understandable. Your house is where your kids are comfortable. It is where you are comfortable. Relocation at this time of upheaval would be stressful. Moving is right up there with divorce for being one of the most stressful life events.

However, do you realize that staying in the house could also be stressful on your wallet?  A Watts Charge (or Watts Credit, they are interchangeable) refers to the obligation of one spouse to the other for the exclusive use of a community property asset following the date of separation.  This legal premise was established in 1985 by John and Carol Watts.  This is most commonly seen when one party remains in the now-former family residence.

This legal right is often seen in tandem with Epstein Credits.  In 1979, the Supreme Court heard from Elayne and Leon Epstein, who, among many things, argued the issue of reimbursements.

Under Epstein, a spouse has the right to reimbursement from the other spouse for one-half of his/her separate property money used to pay a community debt after the date of separation.

The mortgage on a community property house is a community property debt. However, if one spouse remains in the home after the date of separation, using their now-separate property income, to pay for the community property debt, they are entitled to reimbursement for one-half of that amount.  (One-half, not the whole enchilada. You are not allowed to reimburse yourself. Nice try.)

Further, under Watts, if one spouse is living in the house without the other spouse (exclusively using a community asset), then the spouse who has remained in the family home owes the community payment for the amount which is reasonable for the exclusive use of that asset.  Yes, you could owe what is essentially “rent” to the community.

If you are considering a divorce, or are currently in the middle of one, and have either decided to remain or vacate the family residence, you could be either liable for, or entitled to, some money you may not know about.  Contact the team at Mendes Weed to find out.

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Christina Weed - Taxation Law Specialist
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