Watts Charges and Epstein Credits – Use of Community Property and Payment Toward Community Debt
In California, Watts charges and Epstein credits outline the financial responsibilities and benefits associated with the use and payment of community assets and debts following separation but before the final division of property.
Watts charges apply when one spouse has exclusive use of a community asset, such as the family home, during the period between separation and trial. The spouse utilizing the asset may be required to compensate the community for its reasonable rental value. This compensation is calculated by determining the reasonable rental value of the asset and subtracting any community expenses incurred by the occupying spouse, such as mortgage, insurance, taxes, maintenance, and repairs. In re Marriage of Falcone & Fyke, 203 Cal. App. 4th 964, In re Marriage of Mohler, 47 Cal. App. 5th 788, § 23.10 Debt Reimbursement in General, § 20.07 Post-Separation Payments on Community Obligations.
Epstein credits, conversely, are used to reimburse a spouse for post-separation payments made from their separate property to pay down community debt. For instance, if one spouse continues to make mortgage payments on a community property home after separation, they may be entitled to Epstein credits for those payments from their post-separation separate income. These credits are deducted from the overall value of the community estate awarded to the paying spouse as their separate property. In re Marriage of Falcone & Fyke, 203 Cal. App. 4th 964, § 23.10 Debt Reimbursement in General, In re Marriage of Jeffries, 228 Cal. App. 3d 548, In re Marriage of Boblitt, 223 Cal. App. 4th 1004.
How Do Court’s Apply Watts and Epstein?
In practice, the trial court aims to achieve an equitable division of community assets by balancing Watts's charges and Epstein's credits. This means that both spouses should equally share the benefits and burdens of these financial adjustments. For instance, if one spouse receives Epstein credits for paying community debts, the other spouse may be allocated Watts charges for the exclusive use of a community asset, ensuring an equal division of the community estate In re Marriage of Mohler, 47 Cal. App. 5th 788, § 23.10 Debt Reimbursement in General, In re Marriage of Jeffries, 228 Cal. App. 3d 548, In re Marriage of Boblitt, 223 Cal. App. 4th 1004.
Experienced attorneys at Livingstone Law, APC, can help you preserve the marital status quo and protect the community assets in your divorce to ensure just and equitable property division. We have a successful track record of helping clients obtain favorable results. Contact Vera or Elena today for a free consultation.
