Navigating Finances During Separation and Divorce: Understanding Epstein Credits, Watts Charges, and Offsets for Joint Expenses and Bills

Divorce can be complex, especially when it comes to splitting finances. In California, two terms often come up in divorce proceedings: Epstein Credits and Watts Charges. With a clear understanding of these concepts, you can be far better prepared to navigate the division of a marital estate.

Epstein Credits Explained

What are Epstein Credits?

Have you made payments on shared debts like mortgages or car loans after separating from your spouse? If so, you might be entitled to what’s called “Epstein Credits.”

In simple terms, Epstein Credits are reimbursements you can ask for if you’ve used your separate property money (for example, your earnings after separation) to pay off shared debts. This concept was established by the California Supreme Court in the Marriage of Epstein case. 
Additionally, California’s Family Code §2626 allows courts to order these reimbursements when a judge thinks doing so is fair. Although the Family Code section differs somewhat from the specifics of the Epstein case, most California divorce court judges and family law attorneys still refer to various claims to reimbursement as “Epstein credits.”

Common Situations for Epstein Credits

You might seek Epstein Credits for payments like:

  • Mortgage payments
  • Car loan payments
  • Insurance premiums
  • Credit card debts incurred before separation
  • Medical bills from before separation

Watts Charges: What They Mean

What are Watts Charges?

What if your spouse uses shared  assets (community property), like the family home or a car, after you’ve separated? Can one spouse be charged for utilizing these community assets? The answer is yes; they might owe “Watts Charges” to the community estate.

Named after a California Supreme Court case, Watts Charges are similar to rent that one spouse owes to the shared estate for using community assets after separation. This could include living in the family home, using a shared car, or even racking up credit card debt. Watts Charges specifically apply to situations in which a spouse is utilizing community property for his or her personal benefit after their separation. 

Watts Charges are most commonly requested when one spouse has continued living in the former family home after the marriage has ended. That spouse (referred to as the “in-spouse”) is then responsible for the fair rental value of the property in the form of Watts Charges.

Epstein Credits and Watts Charges Explained

Offsetting Epstein Credits and Watts Charges

Often, Epstein Credits and Watts Charges offset each other. For example, if one spouse owes rent for using the family home but has also paid the mortgage, these amounts might cancel each other out. However, if the “rent” value is much higher than the mortgage payments, the spouse not living in the home might get some money back.

There are many factors that can affect whether the credits and charges end up zeroing out, which can make it a complex topic to navigate.

Proving Your Case in Court

It’s important to remember that getting these credits or charges isn’t guaranteed. Credits outlined by Family Code 2626 are categorized as explicitly discretionary; in order words, the trial court is permitted to order these credits, but they are not required. 

You’ll need solid evidence, like documentation of payments or professional property valuations. Courts aim for a fair division of shared property, so presenting clear, well-documented evidence is key. In cases involving complex calculations, partnering with a forensic accountant is a wise decision, and expert witness testimony and professional appraisals can often be key.

Proving divorce credits in court

Defending Your Position

Sometimes, you might have a good reason to argue against these charges or credits. This could be due to an agreement with your spouse, situations where assets weren’t solely used by one person, or other fair reasons, such as:

  • Items were given as gifts
  • Support was not paid
  • Potential credits were already taken into consideration when temporary support was established
  • There is a legitimate reason that the charges or credits would result in an unfair result for one or both parties

The Role of Legal Representation

Navigating Epstein Credits and Watts Charges can be tricky, which is just one of many reasons why experienced family law representation is crucial in your divorce proceedings. A knowledgeable attorney can help you understand your rights, present your case effectively, and strive for a fair outcome.

Schedule a consultation for more information about how Epstein Credits and Watts Charges may factor into your case.