Dissipation of Marital Assets
When the actions of one spouse during or after the breakdown of the marriage results in the loss of property owned by both spouses, the innocent spouse usually harmed because there is less property to distribute upon final dissolution of the marriage. The concept of dissipation of marital assets has developed to discourage such actions and to provide a remedy for innocent spouses.
When is an expenditure or a conveyance considered a dissipation?
In general, only conveyances of marital assets that are made or caused by one spouse, in anticipation of divorce, and for a nonmarital purpose constitutes a dissipation of marital assets.
- Made or caused by one spouse. A majority of states consider intentional, reckless, or negligent actions resulting in the waste, concealment, or conveyance of marital assets sufficient.
- In anticipation of divorce. Before divorce is contemplated, a spouse is generally entitled to spend marital funds as he or she sees fit. To discourage misconduct related to marital assets and to preserve each spouse’s right to share in the marital estate, certain conveyances of marital assets are improper when divorce is anticipated. In general, divorce is anticipated when a marriage is irretrievably broken. “An ‘irretrievably broken’ marriage is one where either or both parties are unable or refuse to cohabit and there are no prospects for a reconciliation.” Harwell v. Harwell 233 Ga. 89, *91, 209 S.E.2d 625, **627 (Ga. 1974).
- Nonmarital purpose. Not every use, sale, or conveyance of a marital asset in anticipation of divorce is a dissipation to which the innocent spouse is entitled a remedy. For example, a spouse’s reasonable expenditure of marital assets to purchase clothing only he or she will wear is not a dissipation even though the purchase benefits only one spouse. The determination of whether a use of marital assets was for a proper marital purpose is made on a case-by-case basis and typically involves an examination of factors such as the need for the expenditure, the amount of the expenditure, and the alleged purpose of the expenditure.
What are the remedies available to an innocent spouse?
The following remedies may be available to a person whose spouse has caused the dissipation of marital assets:
- Rescission. A potential remedy for the dissipation of marital assets is to treat the dissipating spouse’s transfers as fraudulent conveyances and order the cancellation of the transfers or return of the transferred property (rescission). Most states have a fraudulent conveyance statute, and such statutes generally apply to transfers in which both the spouse who transferred the property and the person to whom the property was transferred had a fraudulent intent or transfers made “without receiving a reasonably equivalent value in exchange for the transfer” and resulting in the transferring spouse’s insolvency. Unif. Fraudulent Transfer Act § 2(a).
- Unequal division of marital estate. The court can provide a remedy to the innocent spouse by considering the dissipated assets when ordering distribution of the marital estate. In general, the court can order an unequal division provided such division is reasonable in light of the facts and circumstances of the case. This remedy is typically available in cases where the dissipation was the result of fraud, waste, concealment, or a conveyance for a nonmarital purpose. Additionally, this remedy may be available when neither spouse is completely innocent or when assets were not conveyed in anticipation of divorce but still conveyed in some way that is not completely fair to the other spouse.
- Dissipated assets classified as marital property. In general, only property owned jointly or individually by the spouses on the date it is classified as marital property may be so classified. However, in a majority of states, the court will treat dissipated assets as part of the marital estate and use those assets to satisfy the dissipating spouse’s share of the marital estate. If the value of the dissipated assets exceeds the dissipating spouse’s share of the marital estate, a cash payment to the innocent spouse may be ordered.
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