In dealing with dissipation, courts balance the competing goals of preventing dishonest or reckless expenditure of marital funds against reasonable use of marital funds for legitimate purposes.
Courts consider the marital asset dissipated if 1) the asset is lost; 2) the loss happened upon and after the breakdown of the marriage; 3) the guilty spouse controlled the asset at the time of the loss; and 4) the loss was not incidental to a valid marital purpose. Loss can take many forms. In one California case, an angry spouse who tossed his wife’s jewelry into the Pacific Ocean found his share of the marital estate reduced to compensate for his impulsive action.
Dissipation includes concealment and conveyance of assets through acts that are reckless and negligent but not necessarily intentional.
Very often, dishonest spouses convey assets to friendly third parties. Sometimes, a court orders a rescission of a fraudulent conveyance of assets, which restores the property or assets to the marital estate. The Uniform Fraudulent Transfers Act (UFTA) and case law govern recessions of fraudulently conveyed property.
Expenditures or loss associated with a valid marital purpose is more problematic. No court has made a definite ruling of the meaning of this phrase, but valid marital purpose would be when one partner spends marital assets on routine living expenses, business expenses associated with a marital business, reasonable maintenance and payment of taxes on marital property.
The unfairness of dissipation claims arise in the fact that, once an accusation of dissipation has been made, the burden of proof shifts to the accused to prove that the alleged dissipation did not occur. There are defenses against such unprincipled tactics, but to be effective they must be raised in the right way and at the right time – anything less may prove disastrous.