One of the biggest concerns my clients often have involve the fear their spouse is “divorce planning,” which may include the dissipation of funds. In this blog post, I will discuss this important issue, provide some simple tips on how to spot the dissipation of marital funds, and provide some answers on next steps when the dissipation of marital funds is suspected.
Divorce Planning and the Dissipation of Marital Funds
One of the basic tenants of a New Jersey Divorce is that, absent consent of the other party or Court Order, a party may not dissipate marital assets during the pendency of the divorce. This makes a lot of sense, as it would be unfair for one or both parties to spend freely throughout the divorce litigation when those monies have yet to be accounted for and divided between the parties. That said, many try to get away with dissipating assets. In a worst-case scenario, the other party may even have to retain the services of a forensic accountant, who may work closely with a divorce attorney to try and decipher how funds were used, whether funds were hidden, and the like.
Forensic accountants can be very expensive, however. Some examples of dissipating marital assets may include:
Dissipation of Marital Funds Examples
1) Encumbering a marital asset with a loan;
2) The obvious example of removing money from a bank account, spending cash that belongs to both parties, or the like;
3) Selling an asset without permission of the court or the other party, such as a car.
4) Gifting marital property to another without permission.
5) Changing or attempting to change the title so that it will solely be in one individual’s name;
6) Allowing something to fall into default, such as a car loan;
7) Allowing a family business to decline in value;
8) As you can imagine, there are many other instances where the alienation, encumbering, dissipation, etc., of marital assets can occur.
Such dissipation of marital assets is often considered as an important factor when determining equitable distribution. Although the definition of dissipation is somewhat nebulous, in cases where such dissipation can be demonstrated, it can lead to the imposition of counsel fees, requirements to pay back the amounts dissipated, or other such sanctions or monetary requirements via equitable distribution.
The Dissipation of Funds and Equitable Distribution
In the case of Siegel v. Siegel, (1990), for example, the Court held that a party that dissipated marital assets via gambling could be required to reimburse the other party for those monies.
The Court may require a party accused of dissipating assets to prove that such dissipation is legitimate. Another issue that clients (and their attorney’s) must consider, is whether or not the items dissipated are truly “marital.” For instance, there are a number of exceptions to the equitable distribution statute. For instance, in general non-commingled funds that are obtained from an inheritance, via gift, via personal injury suit (the personal injury section), or that are pre-marital are not subject to equitable distribution.
Dissipation of Funds and Pendente Lite Phase of Litigation
Often during the pendente lite phase of litigation, a party will request non-dissipation as part of a Motion. In addition, if someone is the act of dissipating a joint marital asset, then the other party may often file an Order to Show Cause (or motion, if less time-sensitive) seeking that the party be enjoined from such behavior. Although the dissipation of funds on a large scale is, thankfully, not as common as one might expect, this type of issue often rears its head at some point on a small scale in almost every case.
For instance, a client might ask his or her attorney: “Can I sell some of these old books on eBay.” But if those books are considered a joint marital asset, even such an innocent action might draw the ire of the other party. As such, this is an important consideration for clients or family law attorneys to consider during the pendency of a divorce.
If you are contemplating a New Jersey Divorce and believe your spouse is dissipating marital funds, I look forward to hearing from you and assisting.
Partner with Carl Taylor, Esq.
Ready to Find Your Happily EVEN After? Call Today at 609-359-3345 to Schedule a Confidential Consult (or click here to self-schedule online) and Receive a Free Copy of the 3rd Edition of my 200+ page book, Happily EVEN After: The Guide to Divorce in New Jersey.
