“Divorce and Dissipation: Hidden Assets and Spending” by Suzanne Griffiths, published in Colorado Biz, contains an excellent discussion on the topic of dissipation. She states, “marital asset dissipation occurs when one spouse has previously consumed, given away or otherwise transferred, mismanaged, converted, or otherwise adversely affected property that, had it been before the court, would have been subject to equitable distribution. This commonly takes the form of spending marital funds for the benefit of paramours or wasting marital property.”
This article points out that when making a dissipation claim, a spouse needs only to prove that the expenditure was made at or during the time of the marriage breakdown or was spent for a non-marital purpose, (such as significant gifts, hotel rooms, air tickets etc for a mistress,) during the marriage. Once this has been established, it is the burden of the other spouse to prove the funds were spent on a legitimate purpose. If the court finds that dissipation has occurred, it will appropriately adjust its division of property to offset the dissipation.
Ms. Griffiths recommends considering the following points in analyzing a potential claim for marital asset dissipation:
- Your attorney should be your first resource in making a dissipation claim. Through interrogatories, requests for production of documents, financial releases and depositions, she or he can trace just about any of your spouse’s expenditures during the time of the marriage and can use documents turned up to file a dissipation claim.
- By the same token, be aware that any expenditure you make — be it with credit cards, checking accounts, cash withdrawals or rewards and mileage accounts — are subject to review by your spouses’ attorney through the normal course of divorce proceedings and can be used against you in a dissipation claim.
- It’s not size that matters: The fact that you or your spouse dissipated items of little monetary value will not stop the court from adjusting its allocation of resources, although you personally might determine that the costs of pursuing the dissipation claim exceeds the benefits of having it remedied.
- Ease up on the vice: Excessive expenditures on gambling, drinking, or indiscriminate spending are considered grounds for a marital asset dissipation claim. In addition bad behavior that is seen as economic fault can significantly influence the judge’s discretion in making an equitable division of marital assets.
- Trim down the transfers: If you or your spouse transfer assets to a family member, lover, or third party, one of you may be allocated another asset to make up for the loss caused by the transfer.
- Play down the paramour: Spending marital property on gifts for a significant other is a prime example of asset dissipation and very likely to result in a court-ordered adjustment of property division. It also infuriates the spouse who discovers the dissipation, and may substantially reduce any prospect of reaching an amicable settlement out of court.
- Business is business: Business expenses, are not usually considered dissipation when they are within the range of day-to-day operations and comparable salaries.
- Your word is your bond: If you or your spouse agreed to an expenditure during or after the breakdown of the marriage then there are no grounds for a claim of asset dissipation.
- Hobbling hobbies: Expenditures on recreational activities or hobbies that both parties enjoyed, or approved of, during the marriage are not usually considered examples of dissipation.
- Assessing the damage: The court values dissipated marital assets as at the date that they were dissipated. This is particularly important as it pertains to investment or retirement accounts, as if one spouse cashes out, the court will value the investments based upon on the date they were sold, not based upon what they might have turned into had they remained invested.
Source: Thanks to The Art of Divorce blog for its post on this article.