HBA-AMW H.B. 1245 77(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1245 By: Goodman Juvenile Justice & Family Issues 7/18/2001 Enrolled BACKGROUND AND PURPOSE The 76th Legislature enacted an "equitable interest statute" to create greater equity between the community estate of a married couple and the separate estates of the husband or wife when one of the three marital estates makes an economic contribution to another marital estate. The statute was aimed at reducing the unfairness of a classic rule known as the "Inception of Title." The formula, however, provoked controversy among some family lawyers. House Bill 1245 further develops these provisions to focus on the economic contributions involved in transactions involving the marital estates and to clarify the differences regarding reimbursements and economic contributions. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 1245 amends the Family Code to modify provisions relating to the relationship between separate and community property during a marriage. The bill replaces references regarding equitable interest with references regarding economic contributions (Secs. 3.404 and 3.406). The bill deletes current provisions relating to enhancement in value due to the financial contribution of community property, use of community property to discharge debt on separate property, equitable interest of separate property estates, and use and enjoyment of property (SECTION 2, Sec. 3.006, and Sec. 7.002). H.B. 1245 defines "marital estate" and specifies which dollar amounts are and are not included in the meaning of "economic contribution" (Sec. 3.402). The bill provides that a marital estate that makes an economic contribution to property owned by another marital estate has a claim for economic contribution with respect to the benefitted estate and sets forth provisions relating to the amount of the claim. The bill also provides that the use and enjoyment of property during a marriage for which a claim for economic contribution to the property exists does not create a claim of an offsetting benefit against the claim (Sec. 3.403). The bill provides that a claim for economic contribution creates a claim against the property of the benefitted estate by the contributing estate and that the claim matures on dissolution of the marriage or the death of either spouse (Sec. 3.404). The bill specifies that provisions regarding claims for economic contribution and reimbursement do not affect the right to manage, control, or dispose of marital property under provisions relating to marital property rights and liabilities (Sec. 3.405). H.B. 1245 requires a court, on application for a claim of economic contribution brought by the surviving spouse, the personal representative of the estate of the deceased spouse, or any other person interested in the estate, on the death of a spouse, to impose an equitable lien on the property of a benefitted marital estate to secure a claim for economic contribution by a contributing marital estate. Subject to homestead restrictions, the bill authorizes an equitable lien to be imposed on the entirety of a spouse's property in the marital estate and provides that it is not limited to the item of property that benefitted from an economic contribution (Sec. 3.406). The bill requires a court to offset a claim for one marital estate's economic contribution in a specific asset of a second marital estate against the second marital estate's claim for economic contribution in a specific asset of the first marital estate (Sec. 3.407). The bill sets forth provisions relating to a claim for reimbursement and specifies which claims may not be recognized for reimbursement (Secs. 3.408 and 3.409). H.B. 1245 requires a court, in a decree of divorce or annulment, to determine the rights of both spouses in a claim for economic contribution and sets forth requirements for the award, recognition, division, and dispersion of a claim for economic contribution (Sec. 7.007). The bill provides that a premarital or marital property agreement, whether executed before, on, or after September 1, 1999, that satisfies the requirements of premarital and marital property agreements is effective to waive, release, assign, or partition a claim for economic contribution to the same extent that the agreement would have been effective to waive, release, assign, or partition a claim for reimbursement under the law as it existed immediately before September 1, 1999, unless the agreement provides otherwise (Sec. 3.410). EFFECTIVE DATE September 1, 2001.