When you decide to divorce, one of the most challenging decisions you will need to make will be related to financial issues. This includes the complex process of figuring out all the shared finances and identifying community and separate property.
Second, only to child custody and support issues, the division of property and assets is usually near the top of the crucial decision list that must be negotiated with your spouse in a divorce.
This critical step in the divorce process is often very emotional and a hotly debated topic during California divorce proceedings. It's common for some spouses to attempt to hide or transfer assets to avoid splitting them with their soon-to-be former spouse during the property division process.
This is called the dissipation of marital assets, which occurs when one spouse uses the matrimonial assets for an illegal or inequitable purpose, such as using community property for their benefit when divorce is imminent.
The period for which the dissipation of marital assets occurs often starts when a couple's marriage begins to break apart, and it becomes evident that a divorce will happen. Most divorced couples will tell you there is a point of no return.
Thus, the dissipation of marital assets does not always happen after a spouse has filed a petition for divorce; instead, often at the point of no return, which could occur long before the actual filing for a divorce.
This is sometimes called wasteful dissipation, which occurs when one spouse spends an excessive amount of marital money or assets right before a divorce. In other words, it's when a spouse attempts to get the most of the matrimonial assets while they can.
Dissipation of marital assets is considered a serious matter in the family law courts and could result in a spouse being ordered to repay the matrimonial assets. Our California divorce lawyers will examine this subject in greater detail below.
What Are Some Examples of the Dissipation of Marital Assets?
Dividing property is a specific hot topic in California divorces. Some spouses have deliberately taken steps to reduce the amount of marital property that would typically be split in half during a divorce.
Sometimes, they will attempt to hide or transfer assets to a relative, while at other times, they will spend it before it can be divided. Some common examples are:
- Misuse or diverting marital funds,
- Emptying the joint bank accounts,
- Excessive spending through shopping,
- Transferring money or property to a relative,
- Concealing or hiding marital assets,
- Fraudulently conveying property,
- Selling or giving away marital property before a divorce,
- Intentionally not paying the mortgage,
- Intentionally wasting assets,
- Buying expensive gifts,
- Maxing out sending limits on all the credit cards,
- Spending that does not benefit the household,
- Depositing marital money into a separate bank account.
Perhaps a spouse knows early a divorce will occur and starts selling community property for less than its value. Maybe they go on a shopping spree or buy a new car in their name only.
California family courts will typically consider this spousal behavior as financial misconduct. It could impact the court's decision on dividing property between spouses.
It's often difficult to identify precisely that point of no return when marriage will dissolve, as many different opinions can make dissipation claims challenging.
To support a claim for financial misconduct, a spouse has to prove that the number of assets wasted, spent, or transferred was unusual, frivolous, and didn't benefit the marriage.
For example, if an excessive spending spree only occurred after the spouse was served with divorce papers, this could be considered valid evidence of wasteful dissipation of marital assets.
Tracking Marital Assets in a California Divorce
There are common red flags that show how marital assets are being dissipated.
Some are obvious, such as sudden substantial purchases that can be tracked by reviewing credit card or bank statements.
However, most are concealed and might require a forensic accountant to investigate by examining all the financial records.
The guilty spouse is often placed in a very weak position for marital settlement negotiations if financial misconduct is revealed.
A crucial part of proving a dissipation of marital assets claim is investigating and tracking the assets, seeking evidence on when and how dissipation occurred.
Often, this is a time-consuming process that requires a close examination of all financial transactions will be necessary.
Some of the accounts and documentation that are typically reviewed while investigating dissipation claims include:
- Credit card statements,
- Bank account statements,
- Retirement account statements,
- Investment accounts,
- Tax documents and filings.
Sometimes, divorce will bring out the ugly side of someone, and they will intentionally attempt to hurt their spouse financially, which can have long-term consequences.
What Are Family Law Restraining Orders?
A restraining order is typically related to domestic violence cases but is also associated with financial issues in a California divorce. For example, during the divorce proceedings, some restraining orders will go into effect immediately as part of the divorce summons served on your spouse.
In other words, these common and routine types of restraining orders prohibit a spouse from specific actions involving financial-related matters, such as:
- Selling their family home,
- Concealing or disposing of marital property,
- Draining the joint bank accounts,
- Transferring any assets.
After a restraining order goes into effect, a spouse must notify the other spouse and the family court about any extraordinary spending at least five days in advance. If they fail to follow this procedure, they could be found in contempt of court.
How Can a Family Law Attorney Help You?
If your spouse has accused you of dissipating marital assets, you must deal with the issue as soon as possible. Perhaps we can argue they are mistaken, and you made no such attempt.
Despite their reasons for making such an allegation, you should consult with an experienced family law attorney to discuss how to defend yourself from these claims by your spouse.
If you have valid reasons to believe that your spouse has dissipated marital assets, you should also speak with a lawyer who has dealt with dissipation cases.
If you suspect but can't quite prove dissipation by your spouse, then you will have to examine all your financial records. If you can prove they deliberately misused the marital property, then the supporting documentation of their financial misconduct could impact the property division in your divorce.
For example, a family court judge could use the total value of wasted property to determine how to split your belongings. The divorce process can become more complex if you believe your spouse is unlawfully spending your assets.
Furman & Zavatsky are Los Angeles divorce and family law lawyers providing legal representation across the state. Contact us for a free case consultation by phone or using the contact form.