By Goodman H.B. No. 1245
77R1241 JMM-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the relationship between separate and community
1-3 property during a marriage.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. PUBLIC POLICY. In accordance with the duty of the
1-6 legislature under Section 15, Article XVI, Texas Constitution, to
1-7 pass laws more clearly defining the rights of spouses in relation
1-8 to separate and community property, the legislature declares that,
1-9 under certain circumstances, the economic contributions to the
1-10 value of property during marriage made by one marital estate for
1-11 the benefit of another marital estate create a claim for economic
1-12 contribution for the contributing marital estate in the property of
1-13 the benefited estate as provided by Subchapter E, Chapter 3, Family
1-14 Code.
1-15 SECTION 2. AMENDMENT. Subchapter E, Chapter 3, Family Code,
1-16 is amended to read as follows:
1-17 SUBCHAPTER E. CLAIMS FOR ECONOMIC CONTRIBUTION AND REIMBURSEMENT
1-18 [EQUITABLE INTEREST OF COMMUNITY ESTATE IN ENHANCED
1-19 VALUE OF SEPARATE PROPERTY]
1-20 Sec. 3.401. DEFINITIONS. In this subchapter:
1-21 (1) "Claim for economic contribution" means a claim
1-22 made under this subchapter.
1-23 (2) "Economic contribution" means the contribution to
1-24 a marital estate described by Section 3.402.
2-1 (3) "Equity" means, with respect to specific property
2-2 owned by one or more marital estates, the amount computed by
2-3 subtracting from the present fair market value of the property the
2-4 amount of a lawful lien specific to the property on the date of
2-5 dissolution of the marriage, death of a spouse, or disposition of
2-6 the property.
2-7 (4) "Marital estate" means one of three estates:
2-8 (A) the community property owned by the spouses
2-9 together and referred to as the community marital estate;
2-10 (B) the separate property owned individually by
2-11 the husband and referred to as a separate marital estate; or
2-12 (C) the separate property owned individually by
2-13 the wife, also referred to as a separate marital estate.
2-14 Sec. 3.402. ECONOMIC CONTRIBUTION. (a) For purposes of this
2-15 subchapter, "economic contribution" is the dollar amount of:
2-16 (1) the reduction of the principal amount of a debt
2-17 secured by a lien on property owned before marriage, to the extent
2-18 the lien existed at the time of marriage;
2-19 (2) the reduction of the principal amount of a debt
2-20 secured by a lien on property received by a spouse by gift, devise,
2-21 or descent during a marriage, to the extent the debt existed at the
2-22 time the property was received;
2-23 (3) the reduction of the principal amount of that part
2-24 of a debt, including a home equity loan:
2-25 (A) incurred during a marriage;
2-26 (B) secured by a lien on property; and
2-27 (C) incurred for the acquisition of, or for
3-1 capital improvements to, property;
3-2 (4) the reduction of the principal amount of that part
3-3 of a debt:
3-4 (A) incurred during a marriage;
3-5 (B) secured by a lien on property owned by a
3-6 spouse;
3-7 (C) for which the creditor agreed to look for
3-8 repayment solely to the separate marital estate of the spouse on
3-9 whose property the lien attached; and
3-10 (D) incurred for the acquisition of, or for
3-11 capital improvements to, property;
3-12 (5) the refinancing of the principal amount described
3-13 by Subdivisions (1)-(4), to the extent the refinancing reduces that
3-14 principal amount in a manner described by the appropriate
3-15 subdivision; and
3-16 (6) capital improvements to property other than by
3-17 incurring debt.
3-18 (b) "Economic contribution" does not include the dollar
3-19 amount of:
3-20 (1) expenditures for ordinary maintenance and repair
3-21 or for taxes, interest, or insurance; or
3-22 (2) the contribution by a spouse of time, toil,
3-23 talent, or effort during the marriage.
3-24 Sec. 3.403. CLAIM BASED ON ECONOMIC CONTRIBUTION. (a) A
3-25 marital estate that makes an economic contribution to property
3-26 owned by another marital estate has a claim for economic
3-27 contribution with respect to the benefited estate.
4-1 (b) The amount of the claim under this section is equal to
4-2 the product of:
4-3 (1) the equity in the benefited property on the date
4-4 of dissolution of the marriage, the death of a spouse, or
4-5 disposition of the property; multiplied by
4-6 (2) a fraction of which:
4-7 (A) the numerator is the economic contribution
4-8 to the property by the contributing estate; and
4-9 (B) the denominator is an amount equal to the
4-10 sum of:
4-11 (i) the economic contribution to the
4-12 property by the contributing estate;
4-13 (ii) the equity in the property as of the
4-14 date of the marriage or, if later, the date of the first economic
4-15 contribution by the contributing estate; and
4-16 (iii) the economic contribution to the
4-17 property by the benefited estate during the marriage.
4-18 (c) The amount of a claim under this section may be less
4-19 than the total of the economic contributions made by the
4-20 contributing estate, but may not cause the contributing estate to
4-21 owe funds to the benefited estate.
4-22 (d) The amount of a claim under this section may not exceed
4-23 the equity in the property on the date of dissolution of the
4-24 marriage, the death of a spouse, or disposition of the property.
4-25 (e) The use and enjoyment of property during a marriage for
4-26 which a claim for economic contribution to the property exists does
4-27 not create a claim of an offsetting benefit against the claim.
5-1 [ENHANCEMENT IN VALUE DUE TO FINANCIAL CONTRIBUTION OF COMMUNITY
5-2 PROPERTY. (a) The enhancement in value during a marriage of
5-3 separate property owned by a spouse due to a financial contribution
5-4 made with community property creates an equitable interest of the
5-5 community estate in the separate property.]
5-6 [(b) The equitable interest created under this section is
5-7 measured by the net amount of the enhancement in value of the
5-8 separate property during the marriage due to the financial
5-9 contribution made with community property.]
5-10 [Sec. 3.402. USE OF COMMUNITY PROPERTY TO DISCHARGE DEBT ON
5-11 SEPARATE PROPERTY. (a) The use of community property to discharge
5-12 all or part of a debt on separate property owned by a spouse during
5-13 a marriage creates an equitable interest of the community estate in
5-14 the separate property.]
5-15 [(b) The equitable interest created under Subsection (a) in
5-16 the enhanced value of separate property due to financial
5-17 contributions made with community property is computed by
5-18 multiplying the net enhanced value of the separate property by the
5-19 sum created by dividing:]
5-20 [(1) the total amount of the payments made by the
5-21 community estate to reduce the principal of the debt on the
5-22 separate property; by]
5-23 [(2) the sum of:]
5-24 [(A) the amount computed under Subdivision (1);]
5-25 [(B) the total amount of the payments made by
5-26 the separate estate to reduce the principal on the debt; and]
5-27 [(C) the total amount of any additional amount
6-1 spent by the separate estate to acquire the interest in the
6-2 property.]
6-3 [(c) For purposes of this section, the cost of any
6-4 improvements made to the separate property paid for by either the
6-5 separate or community estate is included as part of the principal
6-6 of the debt.]
6-7 Sec. 3.404 [3.403]. APPLICATION OF INCEPTION OF TITLE RULE;
6-8 OWNERSHIP INTEREST NOT CREATED. (a) This subchapter does not
6-9 affect the rule of inception of title under which the character of
6-10 property is determined at the time the right to own or claim the
6-11 property arises [is acquired].
6-12 (b) The claim for economic contribution [equitable interest]
6-13 created under this subchapter does not create an ownership interest
6-14 in property, but does create a claim against the property of the
6-15 benefited estate by the contributing estate. The claim matures on
6-16 dissolution of the marriage or the death of either spouse.
6-17 Sec. 3.405 [3.404]. MANAGEMENT RIGHTS. This subchapter does
6-18 not affect the right to manage, control, or dispose of marital
6-19 property as provided by this chapter. [EQUITABLE INTEREST OF
6-20 SEPARATE PROPERTY ESTATE. (a) The separate estate of a spouse has
6-21 an equitable interest in the enhanced value of the separate estate
6-22 of the other spouse or in the enhanced value of the community
6-23 estate for:]
6-24 [(1) a financial contribution made to the other
6-25 separate estate or to the community estate; and]
6-26 [(2) the discharge of all or part of a debt of the
6-27 other separate estate or of the community estate.]
7-1 [(b) The equitable interest created by this section is
7-2 measured in the manner provided by Section 3.401(b) or 3.402(b), as
7-3 appropriate.]
7-4 [Sec. 3.405. USE AND ENJOYMENT OF PROPERTY. The use and
7-5 enjoyment of property during a marriage does not create a claim of
7-6 offsetting benefits to the equitable interest created by this
7-7 subchapter.]
7-8 Sec. 3.406. EQUITABLE LIEN. (a) On dissolution [termination]
7-9 of a marriage, the court shall impose an equitable lien on property
7-10 of a marital estate [community or separate property] to secure a
7-11 claim for economic contribution in that property by another marital
7-12 estate [arising by reason of an equitable interest as provided by
7-13 this subchapter].
7-14 (b) On the death of a spouse, a court shall, on application
7-15 for a claim of economic contribution brought by the surviving
7-16 spouse, the personal representative of the estate of the deceased
7-17 spouse, or any other person interested in the estate, as defined by
7-18 Section 3, Texas Probate Code, impose an equitable lien on the
7-19 property of a benefited marital estate to secure a claim for
7-20 economic contribution by a contributing marital estate.
7-21 (c) Subject to homestead restrictions, an equitable lien
7-22 under this section may be imposed on the entirety of a spouse's
7-23 property in the marital estate and is not limited to the item of
7-24 property that benefited from an economic contribution.
7-25 Sec. 3.407. OFFSETTING CLAIMS. The court shall offset a
7-26 claim for one marital estate's economic contribution in a specific
7-27 asset of a second marital estate against the second marital
8-1 estate's claim for economic contribution in a specific asset of the
8-2 first marital estate.
8-3 Sec. 3.408. CLAIM FOR REIMBURSEMENT. (a) A claim for
8-4 economic contribution does not abrogate another claim for
8-5 reimbursement in a factual circumstance not covered by this
8-6 subchapter. In the case of a conflict between a claim for economic
8-7 contribution under this subchapter and a claim for reimbursement,
8-8 the claim for economic contribution, if proven, prevails.
8-9 (b) A claim for reimbursement includes:
8-10 (1) payment by one marital estate of the unsecured
8-11 liabilities of another marital estate; and
8-12 (2) inadequate compensation for the time, toil,
8-13 talent, and effort of a spouse by a business entity under the
8-14 control and direction of that spouse.
8-15 (c) The court shall resolve a claim for reimbursement by
8-16 using equitable principles, including the principle that claims for
8-17 reimbursement may be offset against each other if the court
8-18 determines it to be appropriate.
8-19 (d) Benefits for the use and enjoyment of property may be
8-20 offset against a claim for reimbursement for expenditures to
8-21 benefit a marital estate on property that does not involve a claim
8-22 for economic contribution to the property.
8-23 Sec. 3.409. NONREIMBURSABLE CLAIMS. The court may not
8-24 recognize a marital estate's claim for reimbursement for:
8-25 (1) the payment of child support, alimony, or spousal
8-26 maintenance;
8-27 (2) the living expenses of a spouse or child of a
9-1 spouse;
9-2 (3) contributions of property of a nominal value;
9-3 (4) the payment of a liability of a nominal amount; or
9-4 (5) a student loan owed by a spouse.
9-5 Sec. 3.410. EFFECT OF MARITAL PROPERTY AGREEMENTS. A
9-6 premarital or marital property agreement that satisfies the
9-7 requirements of Chapter 4 is effective to waive, release, assign,
9-8 or partition a claim for economic contribution under this
9-9 subchapter to the same extent the agreement would have been
9-10 effective to waive, release, assign, or partition a claim for
9-11 reimbursement under the law as it existed immediately before
9-12 September 1, 2001, unless the agreement provides otherwise.
9-13 SECTION 3. CONFORMING AMENDMENT. Section 3.006, Family Code,
9-14 is amended to read as follows:
9-15 Sec. 3.006. PROPORTIONAL OWNERSHIP OF PROPERTY BY MARITAL
9-16 ESTATES. [(a)] If the community estate of the spouses and the
9-17 separate estate of a spouse have an ownership interest in property,
9-18 the respective ownership interests of the marital estates are
9-19 determined by the rule of inception of title.
9-20 [(b) An equitable interest created by Subchapter E:]
9-21 [(1) does not create an ownership interest in a
9-22 spouse's separate property; and]
9-23 [(2) creates a claim against the spouse who owns the
9-24 property that matures on termination of the marriage.]
9-25 SECTION 4. CONFORMING AMENDMENT. Section 7.002, Family Code,
9-26 is amended to read as follows:
9-27 Sec. 7.002. DIVISION OF PROPERTY UNDER SPECIAL
10-1 CIRCUMSTANCES. In addition to the division of the estate of the
10-2 parties required by Section 7.001, in a decree of divorce or
10-3 annulment the court shall order a division of the following real
10-4 and personal property, wherever situated, in a manner that the
10-5 court deems just and right, having due regard for the rights of
10-6 each party and any children of the marriage:
10-7 (1) property that was acquired by either spouse while
10-8 domiciled in another state and that would have been community
10-9 property if the spouse who acquired the property had been domiciled
10-10 in this state at the time of the acquisition; or
10-11 (2) property that was acquired by either spouse in
10-12 exchange for real or personal property and that would have been
10-13 community property if the spouse who acquired the property so
10-14 exchanged had been domiciled in this state at the time of its
10-15 acquisition[; or]
10-16 [(3) the equitable interest, as provided by Subchapter
10-17 E, Chapter 3, of the:]
10-18 [(A) community estate in the separate estate of
10-19 a spouse;]
10-20 [(B) separate property of a spouse in the
10-21 separate property of the other spouse; and]
10-22 [(C) separate estate of a spouse in the
10-23 community estate].
10-24 SECTION 5. CONFORMING AMENDMENT. Chapter 7, Family Code, is
10-25 amended by adding Section 7.007 to read as follows:
10-26 Sec. 7.007. DISPOSITION OF CLAIM FOR ECONOMIC CONTRIBUTION
10-27 OR CLAIM FOR REIMBURSEMENT. (a) In a decree of divorce or
11-1 annulment, the court shall determine the rights of both spouses in
11-2 a claim for economic contribution as provided by Subchapter E,
11-3 Chapter 3, and in a manner that the court considers just and right,
11-4 having due regard for the rights of each party and any children of
11-5 the marriage, shall:
11-6 (1) order a division of a claim for economic
11-7 contribution of the community marital estate to the separate
11-8 marital estate of one of the spouses;
11-9 (2) order that a claim for economic contribution of
11-10 one separate marital estate in the community marital estate of the
11-11 other spouse be awarded to the owner of the separate marital
11-12 estate; and
11-13 (3) order that a claim for economic contribution of
11-14 one separate marital estate in the separate marital estate of the
11-15 other spouse be awarded to the owner of the contributing marital
11-16 estate.
11-17 (b) In a decree of divorce or annulment, the court shall
11-18 determine the rights of both spouses in a claim for reimbursement
11-19 as provided by Subchapter E, Chapter 3, and shall apply equitable
11-20 principles to:
11-21 (1) determine whether to recognize the claim after
11-22 taking into account all the relative circumstances of the spouses;
11-23 and
11-24 (2) order a division of the claim for reimbursement,
11-25 if appropriate, in a manner that the court considers just and
11-26 right, having due regard for the rights of each party and any
11-27 children of the marriage.
12-1 SECTION 6. EFFECTIVE DATE; TRANSITION. (a) This Act takes
12-2 effect September 1, 2001.
12-3 (b) The change in law made by this Act applies to a suit for
12-4 dissolution of a marriage or annulment pending on the effective
12-5 date of this Act or filed on or after that date.
12-6 (c) Section 3.410, Family Code, as added by this Act,
12-7 applies to a premarital property agreement or marital property
12-8 agreement executed before, on, or after the effective date of this
12-9 Act.