Posted by: Suzanne Griffiths | January 26, 2015

Divorce and Dissipation: Hidden Assets and Spending

Divorce and Dissipation: Hidden Assets and Spending

While you are traveling on a business trip, you decide to take a quick detour visit to the spa resort with that beautiful lady you met on the last flight to Los Angeles. Being the perfect gentleman, you pick up the tab on your Amex card for the room, meals and a nice bracelet for the damsel. You think that your credit card is absolutely your private property and you are free to use it as you please. Wrong! When the divorce hits down the road, your wife’s attorney can subpoena all these records and you will find yourself faced with a claim for dissipating marital assets. Although Colorado is a “no-fault” divorce state, and evidence of one spouse’s misconduct is not admissible in order to determine how property is divided, the court may adjust amounts awarded to each party if it finds that one spouse has squandered or given away marital assets during the marriage.

Making a dissipation claim

When making a dissipation claim, a spouse needs only to prove that the expenditure was made at or during the time of the marriage breakdown or was spent for a non-marital purpose, (such as significant gifts, hotel rooms, air tickets etc for a mistress,) during the marriage. Once this has been established, it is the burden of the other spouse to prove the funds were spent on a legitimate purpose. If the court finds that dissipation has occurred, it will appropriately adjust its division of property to offset the dissipation.

It’s not size that matters:

The fact that you or your spouse dissipated items of little monetary value will not stop the court from adjusting its allocation of resources, although you personally might determine that the costs of pursuing the dissipation claim exceeds the benefits of having it remedied.

Ease up on the vice:

Excessive expenditures on gambling, drinking, or indiscriminate spending are considered grounds for a marital asset dissipation claim. In addition bad behavior that is seen as economic fault can significantly influence the judge’s discretion in making an equitable division of marital assets.

Trim down the transfers:

If you or your spouse transfer assets to a family member, lover, or third party, one of you may be allocated another asset to make up for the loss caused by the transfer.

Play down the paramour:

Spending marital property on gifts for a significant other is a prime example of asset dissipation and very likely to result in a court-ordered adjustment of property division. It also infuriates the spouse who discovers the dissipation, and may substantially reduce any prospect of reaching an amicable settlement out of court.

Business is business:

Business expenses, are not usually considered dissipation when they are within the range of day-to-day operations and comparable salaries.

Your word is your bond:

If you or your spouse agreed to an expenditure during or after the breakdown of the marriage then there are no grounds for a claim of asset dissipation.

Hobbling hobbies:

Expenditures on recreational activities or hobbies that both parties enjoyed, or approved of, during the marriage are not usually considered examples of dissipation.

Assessing the damage:

The court values dissipated marital assets as at the date that they were dissipated. This is particularly important as it pertains to investment or retirement accounts, as if one spouse cashes out, the court will value the investments based upon on the date they were sold, not based upon what they might have turned into had they remained invested. If you are planning to file for divorce it may be useful to investigate your spouse’s spending. If you are involved in an extramarital affair you need to beware of using marital funds to fund vacations, hotel accommodation and gifts for your significant other or you may be faced with a very angry spouse spending additional attorney fees auditing all your bank accounts, credit card statements and tracking your spending. Remember that marital funds are not yours to spend on third party relationships and your spouse will not feel happy about contributing to the weekend at the spa.

 


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