BFS Explains: Dissipation
A common question from people contemplating divorce is:
“My spouse spent $_____ on ____. Can I get it back?”
Generally, the divorce court can divide up only the assets that the parties own at the time of the divorce – not assets that they formerly owned. There is an exception, however, if the reason for the absence of the asset is “dissipation.” If an asset of the marital estate has been dissipated, the court can require the dissipating party to reimburse the marital estate for the dissipation. Reimbursing the marital estate is the key – you only get your “share” of the dissipated asset. Proving dissipation is time-consuming, difficult and expensive.
To qualify as dissipation, the expenditure in question generally must meet the following criteria:
- It must have been a marital asset: an asset acquired during the marriage.
- It must have been spent for a non-marital purpose.
- It must have been spent at a time that the marriage was in a state of breakdown, within the time limits allowed by statute.
How far back into the marriage can the court look back to find dissipation? The answer is that dissipation can be awarded only for expenditures occurring within the five years before the filing of the divorce petition, unless the party claiming the dissipation knew, or should have known of it, in which case, the look-back period is three years from the date of knowledge or notice. In other words, once a party knows, or has notice of dissipation by the other, the claiming party has three years to file for divorce, or the dissipation cannot be recovered. If the claiming party does not have such knowledge or notice, the look-back period is five years.
What constitutes dissipation? The answer depends on the individual case. Certain types of expenditures, such as money spent on paramours, gambling, or illegal drugs, are usually dissipation, since there is no “marital purpose” for them. Other types of expenditures may or may not be dissipation, depending on whether they meet the criteria identified above and their context in the marriage. For example, dues paid to belong to a golf club, spent after the marriage has broken down, may not be dissipation even though they benefit only one party when they are paid to continue a membership that existed before the breakdown. However, other expenditures, even though they may be for a marital purpose, may be considered dissipation if they are unnecessary or wasteful, or excessive given the parties’ income. Retiring early during divorce without medical necessity can be considered dissipation.
How, then, does a party claim dissipation? This is done by identifying the challenged expenditures or missing funds. The spouse charged with dissipation then has the burden of showing, by clear and specific evidence, how and why the funds were spent. If he or she does not adequately document the expenditures, the court may find dissipation. The dissipating spouse’s explanation, if any, may require the court to determine credibility. General and vague statements that funds were spent on marital expenses or to pay bills are inadequate to avoid a finding of dissipation. Your Boyle Feinberg Sharma, P.C. (BFS) lawyers will guide you in this, and all issues of your case.