Asset Dissipation: The Legality of a Spouse’s Reckless Spending During Divorce Proceedings

Divorce proceedings seek to fairly divide spousal resources. However, some spouses engage in questionable financial behavior during divorce, such as reckless spending. This reckless spending leads to the dissipation of marital assets in what is usually an unlawful manner. Fortunately, the other spouse may have recourse.

Spending During Divorce Proceedings

Of course, spouses are allowed to spend and transfer assets during a divorce. However, neither is allowed to engage in what is considered to be wasteful dissipation of marital assets. 

As the name implies, wasteful dissipation of assets involves financial behavior that wastes or dissipates marital assets, typically to the benefit of one spouse over the other. The following activities would likely be considered wasteful or reckless spending of money or transference of assets:

• Spending money on an extramarital affair
• Buying assets above market value
• Selling assets below market value
• Gambling
• Spending money on excessive drug and alcohol use
• Transferring large sums of money to others
• Racking up credit card or other debt
• Excessive shopping
• Excessive business purchases and expenditures
• Excessive or risky high-dollar investments

Even if these behaviors occur before divorce proceedings occur, the court may rule that marital assets have been wasted. A party contemplating divorce might suddenly engage in one or more of the above-listed behaviors, which still may be considered wasteful. 

One common example of reckless spending involving credit cards is the purchase of high-value or high-dollar assets to be sold for cash. The spouse then pockets or spends the cash, leaving the other spouse with half the debt. 

Equitable Distribution and Reckless Spending

If a court finds that a spouse has engaged in reckless spending, the judge has various options to make the other spouse whole. 

Compel the Return of the Assets

In some wasteful spending cases, the court may force the spouse to return the asset or money. This solution is only effective when the asset or cash is still recoverable.

Deduct the Waste From the Spouse’s Share

Most often, the court will take an accounting of the reckless spending in question during equitable distribution. When wasteful spending is found, the court will take the total amount of wasteful spending and deduct it from that spouse’s share of the marital assets.

For example, if a spouse is found to have recklessly spent $50,000, the court will deduct $50,000 from their share of assets or otherwise credit the other party from their share. If their share totals $150,000, $50,000 will be subtracted from that amount, and they’ll receive $100,000. 

Proving Reckless Spending

Allegations of reckless spending may be true but are of no effect without solid evidence. With the aid of forensic accountants, your Garden City divorce attorney will meticulously review your marriage financial information to detect wasteful spending. Some of what they must prove to the court include:

• When the reckless spending took place
• How the transaction occurred (i.e., cash, wire, check, a sale, etc.)
• Whether the transaction took place without the other spouse’s consent or knowledge

The final point is important because it underlies the importance of consent in these matters. Marital assets belong to both parties, so both parties may need to consent to their use. If the alleged wasteful spender can show that their spouse consented to the reckless spending, that spouse has no recourse. 

Of course, there are many instances where a spouse may argue that they did not consent to certain reckless spending. And here lies one of many issues to be resolved in matters involving reckless spending. Regardless of the issues, an experienced divorce attorney is an essential advocate throughout divorce proceedings. 

Let an Experienced Divorce Lawyer Help

Your financial interests during divorce are important and deserve protection. Family law attorneys at Aiello & DiFalco protect Garden City clients throughout the entire divorce process. Call our office when you need an effective advocate to fight for you.