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Reimbursement for using inheritance on community obligations

Reimbursement for using inheritance on community obligations.What happens when a spouse contributes or loans separate property to the community estate during marriage, then seeks reimbursement of those contributions/loans at divorce?

The recent case of Hinton v. Burns out of the Dallas Court of Appeals sheds light on how this is handled. In Hinton, Husband and Wife both brought separate property assets into the marriage. Husband had a separate property business and inheritance, and Wife had a separate property residence. During the marriage, Husband contributed all of his inheritance to the community estate and it was spent on community expenses. Additionally, Husband’s separate property business made a loan to the community estate. Husband sought reimbursement to his separate property estate from the community estate during the divorce for these contributions. Meanwhile, during the divorce, Wife moved into her separate property residence and established it as her homestead. This residence was confirmed as her separate property during the divorce.

The trial judge found in favor of Husband in his reimbursement claims and awarded judgment in favor of the separate estate and against the community estate for the reimbursement claim. The trial judge then split the reimbursement judgment in half and ordered half of the claim to be borne by Wife in the division of the marital estate. Unfortunately, the trial judge also ordered that the judgment be secured against "all of Wife’s property" including her separate property homestead residence.

Wife appealed, complaining that the trial court erred by imposing the lien against her separate property, and especially against her homestead.

The Dallas Court of Appeals agreed with Wife for two reasons. First, Wife’s separate estate did not benefit from the contributions made by Husband’s separate estate to the community estate so a lien against Wife’s separate estate was improper. Texas Family Code Section 3.406(a) provides that “[o]n dissolution of a marriage, the court may impose an equitable lien on the property of a benefited marital estate to secure a claim for reimbursement against that property by a contributing marital estate.” Thus, the lien was only proper against the community estate which benefited, and not against the Wife’s separate estate. Second, the Texas Constitution prohibits imposing a lien against a homestead except under certain, limited circumstances. This situation failed to come within the exceptions and so the lien was constitutionally prohibited. Thus, the only lien permissible here was the lien imposed against Wife’s portion of the community estate.