Often, while divorce or legal separation proceedings are pending, one party stays in the family home. The parties sometimes choose to do this to ease the transition for their minor children or to keep their overall expenses down until their final order is entered. Other times, the court will order that one party may stay in the home. Either way, significant financial implications can result from one party staying in the residence, including the application of Watts and Jeffries credits. This blog will explain what these are and when they come into play.
Watts credits and Jeffries credits are named after the court cases that first recognized them explicitly. In the Watts case, the court held that when one party to a divorce has the exclusive use of a community asset, that party may be required to reimburse the other party for that use. For example, if a married couple owns their home as a community asset and the wife stays there after the date of separation, she may have to reimburse the husband for the fair rental value of the home. Watts makes sense because the spouse living in the home is benefitting from a community asset. She does not have to pay rent somewhere else. Likewise, the spouse not living in the home cannot make use of the property himself, nor can he rent or sell it. If you would like to read more about community property, please see our separate blog here.
The Jeffries case may come into play if the parties own the home as a community asset and still owe money on the mortgage. In Jeffries, the court held that mortgage payments made out of the separate funds of the spouse living in the family home may be applied by the court to offset Watts charges. Therefore, in the example above, if the wife, while living in the family home, paid the mortgage out of her current salary, she could ask the court to reduce any amount she owed under Watts with Jeffries credits.
Whether Watts and Jeffries apply is discretionary with the court. In other words, it is the judge’s decision whether or not to grant them, after considering all the circumstances in the case. They area called “charges” when assessed against a party; they are called “credits” or “reimbursements” when they are granted in a party’s favor.
You may also have heard of Epstein credits, which may be implicated when one of the parties uses separate funds to pay for community debts. If you are interested in this concept, please read our earlier blog here.
In all of these circumstances, accurate recordkeeping is essential. Charges and credits can be significant to the financial outcome of a divorce or legal separation. They require accurate documentation and an aggressive, knowledgeable lawyer. Judy L. Burger has extensive experience in high conflict divorces in Northern California. Contact her today at (415) 293-8314.