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The Dissipation of Marital Assets

Rachel Alexander Feb. 17, 2016

{4:31 minutes to read} Dissipation of marital assets is an important topic arising in matrimonial law and mediation. Towards the end of the marriage — (during the period when the marital relationship has irrevocably broken down) — during this period, when one spouse uses marital assets for his or her sole benefit, these expenditures may constitute a dissipation of marital assets.

Dissipation must be evaluated based on the circumstances of each particular case. The analysis examines these factors:

  1. The proximity of the expenditure(s) to the time the marriage had originally broken down, when the parties separated, or when they commenced an action for divorce;

  2. Whether the expenditure in question was typical of other expenditures made by the party prior to the breakdown of the  marriage;

  3. Whether the expenditure benefited the joint marital enterprise or benefited one spouse to the exclusion of the other;

  4. The necessity of the particular expenditure;

  5. The amount of the particular expenditure; and

  6. Whether the expenditure was made with the intent to diminish the other spouse’s share of the marital estate.

To understand the concept, let’s look at some examples.

Scenario 1

One spouse always shops at Louis Vuitton, and in the last year of the marriage, she shopped there in exactly the same manner as she had for the prior 10 years of the marriage. While this might be objectionable to her husband, it probably does not constitute a dissipation of assets.

Scenario 2

A different spouse has never shopped at an expensive boutique or spent over $100 per item for clothing or accessories. Suddenly in the last year of the marriage (when it presumably has “broken down”), she is making $5,000 & $10,000 purchases. Her spending habits clearly changed dramatically and likely will be considered dissipation.

Scenario 3

A husband made a business investment three years before the breakdown of the marriage. The investment went bad almost immediately and, in retrospect, was not a prudent enterprise. However, the husband made many deals throughout the marriage; many of them succeeded, some failed, but this one was foolish and lost a substantial amount of marital money. Under dissipation analysis, it is unlikely to be considered dissipation, unless it can be shown that the deal was made to deliberately remove money from the marital estate.

Scenario 4

One spouse deliberately takes funds out of a joint account and puts them into:

  • A personal account;

  • An offshore account; or

  • An account under someone else’s name.

Each of these would be dissipation.

What to Do if Dissipation Is Found

In mediation, if dissipation is identified, we quantify the amount that was dissipated and determine how to redress the “harmed” spouse through other marital assets. We do not place blame or escalate the situation — together we address the injury by redistributing the assets to make the non-dissipating spouse whole. By handling the issue actively and simply, we relieve feelings of unfairness and move the process forward.

Timing Is Everything

Dissipation of marital assets can only occur at the end of the marriage, when it has “broken down.” For example, a wife had an affair three years into the marriage, and spent a lot of money on her paramour. The husband learned of the affair, the couple reconciled and remained married for another 15 years. By doing that, the husband waived any entitlement to claim dissipation and cannot now say, “Hey, lady! I want to be repaid for what you spent on that affair 15 years ago.”

Every day a spouse stays in a marriage, they are likely to be deemed to agreeing to the terms of that marriage and the expenditures of their spouse. Neither complaining nor nagging your spouse to reform will form a basis to claim dissipation. Divorce does not authorize cataloging every marital inequity, nor does it promise remediation of each issue.

During the course of the marriage, things need to be addressed or let go. Divorce provides the remedy of, well, divorce. (And if the marriage was fraught with malfeasance, that may have to be good enough!)

In dissipation analysis, the spotlight is on the tail end of the marriage. The concentration is on spending practices that were done with the objective of siphoning assets from the marriage, thereby decreasing the other spouse’s equitable share. Dissipation is one symptom of marital breakdown we can aim to set right, collectively, during the mediation process.