If you are thinking about getting a divorce in California you may be discussing the logistics of the separation. If you and your spouse own a home you may decide that one of you will continue to live in the home while the other relocates. If your home is community property belonging to both you and your spouse, you may be faced with Epstein and Watts issues when you are settling your divorce.

Here, we provide a brief overview of Epstein Credits and Watts Charges to help you understand your rights and obligations during a divorce.

What are Watts Charges?

If you and your spouse separate and you exclusively remain in the family home after that separation, you may be asked to pay Watts Charges. Watts Charges are requested when one spouse exclusively uses community property after a separation.

Put simply: paying a Watts Charge is like paying rent. You are exclusively using community property (in this case, a family home) for your own personal use and enjoyment. Your spouse, who is generally entitled to 50% of the value of community property, is enjoying 0% of that property’s value and use. Watts charges compensate your spouse for your use of exclusive community property.

What are Epstein Credits?

If you and your spouse separate you exclusively pay the mortgage and/or rent for community property with separate funds, you may request to be reimbursed for your spouse’s share of that burden. These reimbursement requests are known as Epstein Credits.

If, for example, you pay the entirety of the mortgage each month, you may request that your spouse reimburses you for 50% of that payment each month. However, payments must be made from your distinct and separate financial accounts. Epstein Credits will not be applicable if payments are made from jointly-owned or jointly-used banking accounts.

Are Epstein Credits and Watts Charges Automatic?

No, Epstein Credits and Watts Charges are not automatic during a divorce. A spouse who is not exclusively enjoying specific community property must request Watts Charges and a spouse who is exclusively paying for community property from separate and independent funds must request Epstein Credits.

Even when requested, these charges and credits are discretionary and are not automatically awarded. A judge, when reviewing the request for Epstein Credits and/or Watts Charges, will consider several factors when determining the award is appropriate. Factors that may be important in a judge’s evaluation of a request for Epstein & Watts may include:

  • Each spouse’s individual income
  • Each spouse’s earning capacity; and
  • The number of children residing in the home.

Courts may also refuse to award Epstein Credits if:

  • Spouses have a preexisting agreement concerning payment and reimbursement;
  • Payments for the mortgage or community property were intended as a gift to the other spouse;
  • The spouse who made the community property payments continued to live in the home; or
  • The payments for community property were made to satisfy child or spousal support.

A judge will weigh and consider all factors that may be relevant to determining if an award of Epstein Credits and/or Watts Charges is appropriate. Contact an experienced California family law attorney to learn more.

How are Epstein Credits and Watts Charges Calculated?

The burden of proving why Epstein Credits and Watts Charges should be granted is placed on the party asking for the award. Epstein Credits are generally calculated by identifying the actual amount(s) paid for the community property by the requesting spouse.

If you are interested in asking for an award of Epstein Credits you must carefully and purposefully track the payments you make. It is crucial to document that payments for the subject community property are made from separate and exclusive financial accounts. Bank records, mortgage statements, and records of payment can provide the evidence that is necessary to establish cause for an award of Epstein Credits.

Watts Charges are generally calculated by determining the fair market rental value or use of a community asset. If the community asset is a home, the fair market rental value would be the most accurate and appropriate figure. While spouses may be able to speak to the rental value of your home, it may be appropriate to obtain the unbiased opinion of a real estate appraiser and/or expert. An expert can accurately assess the value of a home and determine the fair market rent.

Epstein Credits and Watts Charges may also be offset by one another. If, for example, you pay the entirety of your home’s mortgage payment, but also live in the home exclusively, you may not be awarded Epstein & Watts. This determination, however, will depend on the fair market rental value of your home and the amount paid each month toward your mortgage. A judge will consider these factors when determining if Epstein and Watts are appropriate.

Experienced California Family Law Attorneys

Epstein Credits and Watts Charges can be complicated and it is best to contact an experienced California family law attorney if you are thinking about separating from your spouse. If you’re looking for a divorce lawyer, make sure to check out our guide on finding a good divorce lawyer in California.

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