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ECONOMIC CONTRIBUTION FOR DUMMIES*
(SPECIFICALLY, FAMILY AND PROBATE LAWYERS)
ECONOMIC CONTRIBUTION - TITLE ONE, SUBCHAPTER E TEXAS FAMILY CODE
* Applies only to suits filed on or before August 31, 2009. Repealed for suits filed on or after September 1, 2009. See Texas Family Code Title 1, Subtitle B, Subchapter E., “Claims for Reimbursement.”
WHAT IS ECONOMIC CONTRIBUTION?
The statute usually applies to real estate situations (although the statute
says "property" and thus could conceivably include an auto or other
asset). There must be either
- a debt for purchase money or capital improvements, secured by a lien, which is reduced during marriage,
- or capital improvements during marriage.
All other situations involving payment of unsecured debt still fall under
the prior equitable reimbursement case law. No lien for debt, no capital improvements,
no economic contribution. The Texas Economic Contribution statute is found
at 3.401of the Texas Family Code. The statute was first passed in 1999, underwent
a major revision in 2001, and was amended again in 2003 (to remove a quirk
that under some situations allowed for double reimbursement). The purpose
of the statute is to take some of the discretion away from the courts when
certain equitable reimbursement situations arise. The statute comes into play
when the community is dissolved, either by death or divorce.
There are three marital estates:
- husband's separate
- wife's separate
- the community
When funds were spent during the marriage by one estate to enhance another
estate, there has long been an equitable right of reimbursement. Since the
court was acting in equity, it was required to consider all factors to determine
what was fair. Too often, the following situation was set up:
Husband owned raw land before marriage. After marriage,
the parties built a house on the property with community funds. When wife
requested that the community be reimbursed for the contribution to H's separate
property, H countered with the argument that while his separate property was
enhanced by the $200,000.00 house, if you offset the fact that they got to
live there rent free for 20 years (reasonable rent being $1,000.00 per month
x 240 months = $240,000.00), and considering the tax deductions for owning
the property, the community actually owes him money!
The equitable contribution statute overrules that "offset" argument
by devising a formula to determine the amount that comes back into the community
under the above fact situation. The statute specifically disallows any offset
for the use and benefit of the property 3.403(e), as well as for payment of
taxes and upkeep.
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Economic Contributions for Dummies