Updated on January 16, 2024
Watts Charges and Watts Credits are used in California divorce proceedings. Derived from a 1985 case, they refer to financial adjustments related to the use of community property after separation but before finalizing the divorce. These terms come from the case “In re Marriage of Watts.” They ensure a fair division of assets and liabilities during divorce proceedings.
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Similar terms, different legal meanings
While their names are similar, they refer to different legal actions:
- Watts Charge: This occurs when one spouse uses a community asset (like a family home) exclusively after the separation. The other spouse may able to a charge, which is compensation for half of the reasonable rental value of that asset.
- Watts Credit: Conversely, if one spouse uses separate funds after separation to maintain a community asset (such as mortgage payments on the family home), they might receive credit for those contributions.
The spouses base the Watts Charge’s amount on the value attributed to the actual use of the property. For example, if the community asset is a home that one of the spouses is living in exclusively, then the other spouse can charge the spouse living in the house for one-half of the value ascertained for the house. The value here would be the use value or the fair rental value of the house in question. Therefore, the Watts Charge will be one-half of the fair rental value.
Exceptions to Watts Charges
There are exceptions to the Watts Charge. The Watts Charge doesn’t apply if:
- The community asset’s fair rental value was part of determining spousal support.
- The community asset was a gift to the spouse.
- The spouses had earlier signed an agreement that negates the Watts Charge
How to prove Watts Charges
The spouses would require admissible evidence of the asset’s value to prove Watts Charges. For example, in the earlier used case of the house/residence, the spouse proving the Watts Charge will need to testify to the fair monthly rental value of the residence. Although the spouse can testify themselves, having an expert witness testify on the spouse’s behalf is better. The kind of expert required to testify mainly depends on the kind of community asset in question. For example, a residence valuation will require a different expert from than one estimating the value of a spouse’s business (started after marriage).
Not sure what to do?
Watts credits are a complex issue, and spouses should only apply for them when they are sure they qualify to do so. It is helpful to seek legal counsel with a California divorce advocate and decide on the matter after private consultation.