Mixing money can get messy between two married people. Even happy couples fight over finances, so when couples divorce, money usually becomes a serious sticking point.
As a marriage deteriorates, sometimes one spouse takes advantage of the situation or reacts in a defensive way by hiding or recklessly spending the couple’s money. They may also sell or destroy marital assets as a way to benefit their own situation or hurt their soon-to-be ex-spouse.
When these actions happen in a way that violates the law, it’s known legally as “dissipation.”
What is dissipation?
In the lead-up to a separation, most couples know their marriage is breaking down. As this happens, one person might hide money or start spending recklessly in a bid to benefit their own position.
Dissipation happens when one spouse destroys, wastes or hides property or money while their marriage is undergoing an irretrievable breakdown.
That spouse could be guilty of dissipation if he or she performs actions like these at any time from the start of the spouses’ relationship deterioration until their divorce is settled in court.
When thinking about whether certain actions constitute the legal definition of dissipation, it’s important to remember the difference between marital and non-marital property.
A spouse can only commit dissipation in regards to marital money and property. If a spouse possesses non-marital property such as a sole inheritance or preexisting business holdings, he or she has sole discretion over the use and distribution of those assets.
Common forms of dissipation include:
- Spending marital funds on things related to extramarital relationships
- She bought her boyfriend a Rolex and took him to Las Vegas with marital money.
- Using marital funds for non-marital purposes (exceptions apply)
- He used marital funds to rent a house for his girlfriend and her three kids. (An exception is him using marital funds to rent an apartment for himself before the final divorce settlement.)
- Withdrawing large amounts of cash for unknown reasons
- She took out $2,000 from the ATM, and won’t say what she used it for
- Cashing out investments
- He cashed in his 401(k) and hid the money.
- Transferring assets to a family member or third party
- She put the family home in her mother’s name.
- Giving “gifts” of money or property to a family member or third party.
- He gave his brother $5,000 for no reason.
- Excessive habits such as drinking, gambling or shopping
- She spent $3,500 playing roulette at the casino.
- Selling or destroying marital property
- He got angry and kicked holes in the walls of the house.
- Indulging in expensive vacations or hobbies
- She signed up for an expensive membership at a rock climbing gym.
- Deliberately incurring shared debt, including late fees from unpaid bills
- He stopped paying mortgage payments as an act of retribution.
- Shifting assets, incurring debt and diminishing the value of a shared business
- She decided to sell a franchise of their restaurant without his knowledge.
If a family law judge rules that one spouse is guilty of dissipation, he or she will make a ruling intended to recompense the other spouse for their losses.
The judge could rule that the spouse guilty of dissipation must return the equivalent value of funds or property back to the marital “pot.” Or the judge could award a higher percentage of the final divorce settlement to the spouse who was the victim of the dissipation.
How do I prevent dissipation?
Unfortunately, no one can completely prevent dissipation if their spouse is determined to commit these acts of bad faith leading up to divorce. Most property in a wedded relationship is legally marital property, and a couple’s assets and debts are considered shared unless there is proof to the contrary.
However, some basic actions can help dissuade dissipation. Canceling joint credit cards can help prevent your spouse from accruing large debts. While they might open new credit cards, a judge would likely view the timing as an act of dissipation.
Maintaining your own bank account where your paycheck is deposited may be another way to prevent dissipation. This gets tricky, however, because your preventive act itself may be viewed as dissipation if you unlawfully block your spouse from accessing marital funds for legitimate purposes.
People who are disconnected from their personal finances are in a particularly unfavorable situation. It’s difficult for someone to detect that dissipation is occurring when their spouse is solely responsible for the couple’s finances.
Though you can’t fully prevent dissipation, it helps to understand and monitor your personal finances. Even if you don’t manage your bills and investments, keeping an eye on them can help you avoid suffering financial loss through dissipation.
It doesn’t matter who has been managing the money — marital assets belong to the couple. And you can’t tell what you’re missing if you don’t know what you have.
How do I prove dissipation?
A legal claim of dissipation during divorce proceedings is a serious step. It’s not enough to allege or make basic statements about a spouse’s efforts at hiding or wasting money.
Also, in order for a family law judge to determine an action qualifies as dissipation, it must meet a specific set of criteria. For these reasons, documentation becomes crucial in asserting or defending a claim of dissipation.
When one spouse alleges dissipation, they provide as much evidence as possible showing that their spouse spent money, cashed in investments, or incurred debt without their consent.
Then, the accused spouse must provide documentation to defend his or her use of funds, showing their actions do not meet the criteria for dissipation.
Regardless of which side you’re on, strengthen your case by maintaining, researching and securing documents for evidence. Dissipation cases often rely on patterns of spending to prove whether the spouse’s actions were within norms of the marital relationship.
For this reason, you’ll want financial records from before, during and after the breakdown of the marriage.
One example: If your husband buys your 17-year-old son a new truck without your knowledge, the judge may view that as dissipation.
However, if your financial records show you mutually bought your two other children new vehicles when they turned 17 also, this could be seen as a normal and expected purchase in the marriage and not an action of dissipation.
Here are some other examples of specific cases in the law when judges determined dissipation had taken place:
- Failure to pay income tax on time, incurring substantial penalties
- Contribution to a church not consistent with prior contributions
- Cost of defending false abuse allegations in a family law court proceeding
- Use of an insurance settlement to buy a new truck and tools
- Unexplained use of a tax refund
- Creation of a trust for the education of the children without wife’s knowledge
- The payment of income tax on non-marital income
On the other hand, here are some cases in which judges found a spouse’s actions did not constitute dissipation:
- Spending marital funds during separation for necessary, appropriate and legitimate living expenses*
- A lawyer paying his paralegal $225 per week for her services, originating many years prior to the dissolution
- Expenditures for the husband’s mother similar to what he spent before the marriage breakdown with no objection by wife
- Expenses for vacations with children similar to those taken before marital breakdown
- A continuation of spending patterns enjoyed prior to the breakdown of the marriage
- Payment for a reasonable apartment for a required business assignment for a period of time in another state, even though his girlfriend stayed in the apartment with him
- Withdrawal by wife of funds from a joint account and her IRA to pay reasonable expenses for her and her daughter after separation, especially since the wife received no child support for the first 7 months after separation
- Vacations by husband similar to those taken by the parties prior to the breakdown of the marriage
- Losses incurred by wife on employee stock ownership when the initial plan was in good faith
- Losses incurred on rehabbing house similar to transactions prior to the marriage breakdown
- Failure to make mortgage payments leading to foreclosure after wife had lost her job
Communication About dissipation
Dissipation is very fact specific and you must work very closely with your legal team to assert or defend such allegations.
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* In re Marriage of Murphy, 259 Ill. App. 3d 336, 340-41 (Ill. App. Ct. 4th Dist. 1994); In re Marriage of Hagshenas, 234 Ill. App. 3d 178, 198 (Ill. App. Ct. 3rd Dist. 1992); In re Marriage of Severson 228 Ill. App. 3d 820, 827 (Ill. App. Ct. 1st Dist. 1992)