Serving Clients Across Texas

Economic Contribution Statute Repealed Hooray!

The Texas Legislature repealed the economic contribution statute, which has been a bane to Texas Family Law Attorneys since it was originally passed. Instead, Senate Bill 866 replaces economic contribution with a system of reimbursement and offset based on equitable principles. Further, it clarifies that the party seeking the offset has the burden of proof.

Click here to see the text of SB 866. This law is effective on September 1, 2009 to any newly filed case.

A claim for reimbursement under the new section 3.402 of the Texas Family Code includes:

  1. payment by one marital estate of the unsecured liabilities of another marital estate;
  2. inadequate compensation for the time, toil, talent, and effort of a spouse by a business entity under the control and direction of that spouse;
  3. the reduction of the principal amount of a debt secured by a lien on property owned before marriage, to the extent the debt existed at the time of marriage;
  4. the reduction of the principal amount of a debt secured by a lien on property received by a spouse by gift, devise, or descent during a marriage, to the extent the debt existed at the time the property was received;
  5. the reduction of the principal amount of that part of a debt, including a home equity loan:
    1. incurred during a marriage;
    2. secured by a lien on property; and
    3. incurred for the acquisition of, or for capital improvements to, property;
  6. the reduction of the principal amount of that part of a debt:
    1. incurred during a marriage;
    2. secured by a lien on property owned by a spouse;
    3. for which the creditor agreed to look for repayment solely to the separate marital estate of the spouse on whose property the lien attached; and
    4. incurred for the acquisition of, or for capital improvements to, property;
  7. the refinancing of the principal amount described by Subdivisions (3)-(6), to the extent the refinancing reduces that principal amount in a manner described by the applicable subdivision;
  8. capital improvements to property other than by incurring debt; and
  9. the reduction by the community property estate of an unsecured debt incurred by the separate estate of one of the spouses.

The new law further allows for offset of competing reimbursement claims against each other when appropriate. Any benefit for the use and enjoyment of property may be offsent against a claim for reimbursement for expenditures to benefit a marital estate, except a separate estate of a spouse may not claim an offset for use and enjoyment of a primary or secondary residence owned wholly or partly by the separate estate against contributions made by the community estate to the separate estate.

Where funds are sought to be reimbursed for improvements to another marital estate, the court is to use the standard of enhancement of value.

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