When a high-asset divorce is approaching, some spouses attempt to decrease the value of their marital estate before the property division process begins. They might drain accounts, rack up debt, transfer assets or spend marital funds on a new romantic interest. Under New York’s equitable distribution rules, courts can take the dissipation of marital assets into account and adjust the division of property accordingly to address the financial harm caused by a spouse’s misconduct.
In most cases, divorcing couples act in good faith. However, some husband and wives engage in a form of financial misconduct, called “dissipation.” This is the hiding or squandering of marital assets in order to reduce the value of the divisible marital estate.
There are many specific dissipation tactics that spouses use to gain an unfair advantage during the equitable distribution process, such as:
- Accruing large credit card balances for purchases that do not benefit their spouse
- Emptying joint checking or savings accounts
- Temporarily transferring assets to friends or relatives
- Selling marital property for less than fair market value
- Spending marital funds on gambling, substance abuse, extramarital relationships or other purposes unrelated to the marriage
Dissipation frequently starts before the first divorce paperwork is filed. When someone knows the end of their marriage is on the horizon, they might start to spend aggressively, burning through income and savings or accruing large amounts of credit card debt. If a financial analysis shows that a spouse’s spending habits shifted dramatically in the timeframe leading up to a divorce or shortly after the filing, the court can determine that the conduct was intentional dissipation.
Allegations of dissipation generally require evidence showing when the spending occurred, how marital funds were used and why the expenditures were improper. Bank statements, credit card records, account transfers and other financial documents often play a critical role in proving a claim. In cases involving gambling, substance abuse or extramarital affairs, documentation is especially important. If one spouse concealed those activities and used marital resources to support them, the resulting expenditures may support a dissipation claim. The key issue is whether marital funds were purposefully used in a manner that unfairly reduced the value of the marital estate.
Once a claim of dissipation is proven, the court may take several different actions. When dividing the marital debts, the spouse who ran up the credit cards may find themselves solely responsible for those bills. The spouse who wasted the couple’s savings may end up with a smaller share of any remaining assets.
High-asset divorces are prone to allegations of dissipation, partially because it can be easier to obfuscate complex financial holdings and transactions. That makes it easier for one spouse to conceal wasteful spending or improper transfers. A skilled attorney can work with financial professionals, including forensic accountants, to identify financial irregularities, trace assets and pursue an equitable distribution of the marital estate under New York law.
Bryan L. Salamone and Associates P.C. has successfully handled dissipation claims in high-asset divorce cases throughout Nassau and Suffolk counties. You can make an appointment to discuss your issue by calling 631-388-6009 or contact us online.