ECONOMIC CONTRIBUTION FOR DUMMIES
(SPECIFICALLY, FAMILY AND PROBATE LAWYERS)
ECONOMIC CONTRIBUTION - TITLE ONE, SUBCHAPTER E TEXAS FAMILY CODE

WHAT IS ECONOMIC CONTRIBUTION?

The statute usually applies to real estate situations (although the statute says "property" and thus could conceivably include an auto or other asset). There must be either

• a debt for purchase money or capital improvements, secured by a lien, which is reduced during marriage,
• or capital improvements during marriage.

All other situations involving payment of unsecured debt still fall under the prior equitable reimbursement case law. No lien for debt, no capital improvements, no economic contribution. The Texas Economic Contribution statute is found at 3.401of the Texas Family Code. The statute was first passed in 1999, underwent a major revision in 2001, and was amended again in 2003 (to remove a quirk that under some situations allowed for double reimbursement). The purpose of the statute is to take some of the discretion away from the courts when certain equitable reimbursement situations arise. The statute comes into play when the community is dissolved, either by death or divorce.

There are three marital estates:

1. husband's separate
2. wife's separate
3. the community

When funds were spent during the marriage by one estate to enhance another estate, there has long been an equitable right of reimbursement. Since the court was acting in equity, it was required to consider all factors to determine what was fair. Too often, the following situation was set up:

Husband owned raw land before marriage. After marriage, the parties built a house on the property with community funds. When wife requested that the community be reimbursed for the contribution to H's separate property, H countered with the argument that while his separate property was enhanced by the $200,000.00 house, if you offset the fact that they got to live there rent free for 20 years (reasonable rent being $1,000.00 per month x 240 months = $240,000.00), and considering the tax deductions for owning the property, the community actually owes him money!

The equitable contribution statute overrules that "offset" argument by devising a formula to determine the amount that comes back into the community under the above fact situation. The statute specifically disallows any offset for the use and benefit of the property 3.403(e), as well as for payment of taxes and upkeep.

Economic Contribution for Dummies Continued (When Does the Statute Apply?)