I’ve previously write about how a divorce court will divide a divorcing couple’s assets and debts. A fairly common problem arises when one spouse had previously spent a bunch of money on their new lover, leaving less money in the joint accounts to split. It doesn’t seem fair that the innocent spouse should be left with less money due to the affair, but how can the court equalize the distribution?
I’m going to use the case of Fickle v. Fickle (link removed) to illustrate how the judge should handle this situation. There were several issues in this opinion, but I’m going to focus on the dissipation of marital assets.
The couple had been married about 13 years when the wife filed for divorce. The couple had significant resources, and after hearing all of the evidence the judge decided the property should be split evenly between the parties. Among all the proof of property, the wife submitted evidence that over the course of a couple years (which happened to be while the divorce was pending), the husband had spent several thousand dollars on his new girlfriend.
The trial court dealt with this by dividing the assets evenly, but the court assigned $7,500 in dissipated assets to husband, which had the result of compensating the wife for the missing funds (I’ll demonstrate how this works in a bit).
Dissipation of marital assets analysis
The court quoted the following language, which is an excellent description of dissipation:
Dissipation of marital property occurs when one spouse uses marital property, frivolously and without justification, for a purpose unrelated to the marriage and at a time when the marriage is breaking down. . . . Dissipation involves intentional or purposeful conduct . . . that has the effect of reducing the funds available for equitable distribution.
It’s important to note that dissipation of marital property doesn’t include any type of spending. Of course, the regular expenses of maintaining a household, even if the home is expensive, is not dissipation. Neither is putting money into poor investments or using marital funds to prop up a failing business. Although the court doesn’t say so in this opinion, other cases say the court should apply the following factors:
- [W]hether the expenditure benefitted the marriage or was made for a purpose entirely unrelated to the marriage;
- whether the expenditure or transaction occurred when the parties were experiencing marital difficulties or were contemplating divorce;
- whether the expenditure was excessive or de minimis; and
- whether the dissipating party intended to hide, deplete, or divert a marital asset.
In this case, the wife was able to show the court that her husband paid the girlfriend’s airfare for two trips to Alaska. He had also taken her on trips to: Little Rock, Arkansas; Indianapolis, Indiana; Connecticut; New Hampshire; and three trips to Baton Rouge, Louisiana. The wife brought documentation of considerable expenses incurred by her husband on these trips. Husband admitted that he had taken his girlfriend on all these trips, but claimed that most of them were business trips and the expense was covered by other parties. He did not offer any proof of reimbursement, however.
Applying the analysis above, the court decided the trial court was reasonable in crediting the husband with $7,500 in dissipated assets.
Assigning dissipated funds
Earlier I promised to explain how your trial court will compensate the innocent spouse for the dissipated funds. Here’s an extremely simple example: Suppose a divorcing couple had $30,000 in assets and, as above, the husband has dissipated $7,500. Generally, there is a presumption that the property will be divided equally without regard to the fault of the parties. Without assigning any fault, the court can still create an equal division by assigning the dissipated money to the husband as follows:
- $7,500 in marital assets
- $7,500 in dissipated funds
- $15,000 in marital assets
By dividing the assets this way, the court has protected the wife from a loss she might have suffered from the husband’s misdeeds, as she retains the same $15,000 she would have taken had the husband been able to behave himself. Of course, in real life the situation is never this simple.
What you need to know
Dissipation is not limited to extramarital affairs. People can dissipate assets by “loaning” their family members large amounts of money, selling expensive assets for much less than they’re worth, or outright trying to hide property or accounts. If you suspect this may be an issue in your divorce, your lawyer will assist you by performing discovery to find out where your assets have been kept and where they have been moved.
Furthermore, this is one more reason why I would advise you not to date during your divorce, as this can add just one more issue to further complicate your situation.
Need help with your divorce? Contact me to find out how I can assist you.