Monday, May 27, 2013

Help! My spouse is spending all of our money! Will I get this back in a divorce?

Courts can sometimes conclude that dissipation has occurred when one spouse squanders marital money for his or her own benefit at a time when that spouse knows the marriage will likely end in divorce.  However, the issue depends on the unique facts and circumstances of each case.  During equitable distribution in New Jersey, the Court is required to consider the “contribution of each party to the acquisition, dissipation, preservation, depreciation or appreciation in the amount or value of the marital property.” N.J.S.A.  Although dissipation was not defined by the New Jersey legislature, other state courts with similar statutes have defined dissipation.  Below are a few case summaries that highlight the varying views of different state courts.

For example, in Illinois, the Appellate Court said dissipation occurs when “a spouse uses marital property for his or her own benefit and for a purpose unrelated to the marriage at a time when the marriage relationship was in serious jeopardy.” Head v. Head, 168 Ill.App.3d 697 (1998). The Illinois court went on to further explain that whether conduct constitutes dissipation depends on the facts and circumstances of the particular case. Most jurisdictions agree that each case can only be decided on the specific facts and circumstances brought before the court.

Although most courts have uniformly held that one spouse’s dissipation of marital property is a factor to be considered during equitable distribution, courts are less uniform when addressing the issue of whether the purpose of the expenditure of marital funds amounts to dissipation under the given facts and circumstances. Thus, courts have considered a variety of factors including, but not limited to: 

(1) the proximity of the expenditure to the parties’ separation; (2) whether the expenditure was typical of expenditures made by the parties prior to the breakdown of the marriage; (3) whether the expenditure benefitted the “joint” marital enterprise or was for the benefit of one spouse to the exclusion of the other; and (4) the need for, and amount of, the expenditure.

Kothari v. Kothari, 255 N.J.Super 500, 507 (1992). The question the courts must ultimately look at it is whether the spouse spent those assets with the intent of diminishing the other spouse’s share of the marital estate. In Kothari, the expenditures made by Husband were all during a period of a few years when he repeatedly filed for divorce in different states and even in India. The expenditures served only Husband’s interests in that the payments were all made for the care and upkeep of Husband’s parents. Therefore, the expenditures diverted money from away from Wife’s share of the marital assets and were considered a dissipation. The trial court properly considered the money for equitable distribution.

In Finan, the Supreme Court of Connecticut was asked to determine whether transactions that occurred prior to the physical separation of spouses could constitute dissipation of marital assets for purposes of equitable distribution. Finan v. Finan, 287 Conn. 491 (2008). The Supreme Court of Connecticut determined that a majority of their sister states’ trial courts allowed consideration of a spouse’s dissipation of marital assets that occurred prior to the spouse’s physical separation when allocating assets to each spouse. However, several states that allow courts to recognize pre-separation dissipation say that the dissipation must occur either in contemplation of divorce or separation or when the marriage was undergoing an irretrievable breakdown. The Connecticut Supreme Court also advised trial courts to remain aware of the fact that the removal of assets from the marital estate is not limited to after the date of separation or after a complete breakdown of the marriage. As long as the trial court finds that the spouse removed the assets from the marital estate while contemplating divorce or if the trial court finds that the marriage was irretrievably broken, then the removal is dissipation and the amount of assets removed from the marital estate can be considered for equitable distribution.

In Gruver, the Pennsylvania Superior Court did not disturb the master’s and trial court’s findings that Husband dissipated marital assets when he refused to file a joint tax return for the final two years Husband and Wife were legally married. Gruver v. Gruver, 372 Pa.Super. 194 (1988). The refusal to file jointly resulted in increased tax liability for both parties. Therefore, Husband was charged to the extent of the increased tax liability during equitable distribution.

In Goldman v. Goldman, the New Jersey Appellate Court decided that Husband’s use of marital assets post-separation did not lead to the conclusion that all of Husband’s use of marital funds was dissipation. Goldman v. Goldman, 275 N.J.Super. 452/N.J.Super. 1977).  Furthermore, the Appellate Court upheld the trial court’s decision that the transfer of marital funds into Husband’s failing business was not in violation of a court order barring the parties from alienating or encumbering any of the marital assets.

In Grunfeld v. Grunfeld, the New York Appellate Court reviewed the trial court’s decision that Husband’s aggressive trading in commodities and securities during the marriage was not wasteful dissipation of assets. Grunfeld v. Grunfeld, A.D.2d 12 (1999). The trial judge correctly reasoned that Husband’s original allocation of funds and aggressive trading was reasonable and that he had a good faith belief in the profitability of the type of trading he was engaged in. The New York Appellate Court reasoned that Wife did not dispute the greater losses that Husband suffered in standard investments; therefore, that the losses Husband suffered in the commodities trading  were properly treated as marital debt.

In Diament v. Diament, Wife withdrew $300,000.00 from a jointly held Vanguard account and deposited the money in another bank. Diament v. Diament, 816 A.2d 256 (Pa.Super.Ct. 2003). When Wife was asked by Vanguard to return the withdrawal, she was unable to account for $19,000.00. Vanguard reimbursed the other bank for the $19,000.00 and Husband argued he was entitled to a $38,000.00 reduction in the marital estate. The trial court correctly reduced the marital estate by only $19,000.00 because it would amount to double-dipping. The Pennsylvania Appellate court held that the trial court properly charged Wife for the $19,000.00 when distributing the marital assets.

Even if you believe your spouse dissipated assets, a court may not agree.  Every case requires a separate analysis.  Additionally, and unfortunately, different judges can reach different results.  If you have questions or concerns about the dissipation of marital assets before or after separation, you should contact an attorney.

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