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Dissipation of Marital Asset Claims
What is a dissipation of marital assets claim?

In many divorces the parties simply go berserk. It is very common that one spouse may hide and/or spend down marital assets in the anticipation of a divorce. The typical allegations of dissipation include bad business decisions, spending marital monies to support a spouse's extended family, gambling debts, and spending money on extramarital affairs.

If a spouse extravagantly spends marital assets then this will only decrease the size of the marital asset. Therefore, the dependent spouse will ultimately receive a much smaller share of the marital assets. The critical issue in these types of scenarios is at what point does one spouse's extravagant spending considered to be dissipation.

In some divorce cases it is unfortunate that a spouse will "get away" with a marital dissipation claim. However, if you are busted for dissipating marital assets then I have seen many judges wipe out that person financially. The judges have a great deal of judicial discretion when it comes to dealing with claims of marital dissipation. The total amounts that a person dissipates often pales in comparison to the amount of equitable distribution that he will lose in the long run.

How does New Jersey law define dissipation?

The key case that defines what is dissipation is Kothari v. Kothari, 255 N.J. Super 500 (App. Div. 1992). Here, the Appellate Division defined dissipation as "where a spouse uses marital property for his or her own benefit and for a purpose unrelated to the marriage at a time when the marital relationship was in serious jeopardy."

What is and what is not considered the dissipation of marital assets?
  • Bonventura v. Bonaventura, 2005 WL 5801340 at 3 (App. Div. 2005). Here, the husband lost a sizable amount of marital assets by day trading. What a brilliant idea! The court held that these lost assets was not a dissipation of marital assets. The court held that the husband had no intent to dissipate any marital assets.
  • Ferrier v. Anastons-Ferrier, 2005 WL 3617896 (App. Div. 2006). Here, the husband liquidated some marital assets to pay off his personal debts and his support obligations. These assets were liquidated after the divorce complaint was filed. The court held that the liquidation of these marital assets was considered to be dissipation.
  • Goldman v. Goldman, 248 N.J. Super. 10 (Ch. Div. 1991). Here, the plaintiff-husband advanced $400,000 of marital assets to his car dealership. The car dealership was ultimately lost. The court held that this advancement was not dissipation. The court held that it was made in a good faith effort to save the family car dealership. Finally, the court noted that he tried to save the dealership for himself and his wife.
  • Kabir v. Kabir, 2009 WL 1097901 (App. Div. April 24, 2009). Here, the husband wired funds to Bangladesh after the couple separated. The court held that these wire transfers were considered to be dissipation.
  • Kothari v. Kothari, 255 N.J. Super 500 (App. Div. 1992). Here, the court held that funds that are wired out of the country to a party's family after the party contemplated divorce is considered to be dissipation. Here, the defendant-husband dissipated marital assets when he wired large amounts of money to his parents in India. The husband had filed for divorce three separate times.
  • Kronberg v. Kronberg, 2006 WL 1507036 (App. Div., June 2, 2006). Here, the husband kept the home in poor condition after the couple separates. The husband lived in the marital home after the separation. The wife was awarded a greater share of the equity in the marital home because of the husband's poor choices in maintaining the house. This decision led to a decrease in the marital assets. Thus, a spouse's intentional poor maintenance of a marital asset after the filing of a complaint for divorce can be considered to be dissipation.
  • Lynn v. Lynn, 165 N.J. Super 328 (App. Div. 1979). Here, the court held that a person could not use marital assets to pay for his support obligations.

How can a judge rule on a dissipation of assets case?

A court has a great deal of discretion in fashioning an equitable remedy in any divorce where there are serious claims of dissipation. N.J.S.A. 2A:34-23.1(l) authorized a court to consider "the contribution of each part to the .... dissipation .... in the amount of value of the marital property .... when determining the equitable distribution of the marital assets." See, Painter v. Painter, 65 N.J. 196 (1974); (Holding that a court can promptly take judicial action to remedy any fraudulent disposition of property in any divorce.)

The court must analyze several facts to determine if one spouse's spending is considered to be dissipation. The court will consider:

  • The timing of the expenditures to the couple's separation;
  • Whether the expenditures were a typical expenditure made by the parties prior to the breakdown of the marriage;
  • Whether the expenditures benefitted both spouses;
  • Whether the expenditures only benefitted one spouse;
  • The need for, and the amount of the expenditure.

If there is a gross dissipation, then the court has the authority to allocate assets. Moreover, it can also disproportionally allocate any marital debt in the case divorce proceedings.

My husband ran up a $200,000 bill to the Borgata casino. How can the court allocate this debt in our divorce?

The court also has the authority to allocate any debt in the divorce case. Most likely the court will rule that the husband is solely responsible for debt to the Borgata. Illustrative is the case of Monte v. Monte, 212 N.J. Super. 557 (App. Div. 1996). Here, the Appellate Division held that, "a debt resulted because one spouse intentional dissipated marital assets then such intentional dissipation is no more than a fraud on the marital rights and the debt will not be charged to the other spouse." Therefore, the court will hold that your husband committed fraud upon the marriage by running up such a large gambling debt. Accordingly, the court will order your husband to pay for this debt out of his own assets and income.

My husband is a scheming demon and we are now getting a divorce. What steps can I take to prevent him from hiding and stealing all of our money?
  • File a Notice of Lis Pendens: In a divorce case where real estate is titled in either party's name or in both parties' names, and if it is subject to equitable distribution, then a Notice of Lis Pendens can be filed against the property. See, N.J.S.A. 2A:15-6. Basically, a Notice of Lis Pendens is a pleading that alerts third parties that a party has a legal right to the subject property. Therefore, the public is placed on notice of the potential claims to the real estate.
  • Obtain a Court Order to Freeze Marital Account(s): This is the most common method used to preserve a marital estate. A court can order that both spouses shall not dissipate, hypothecate, withdraw or otherwise use any marital assets. Once the order is signed by the judge, then legal counsel can send the executed order to each bank, broker, mutual fund, credit union, to freeze these accounts. Believe me, these financial institutions will scrupulously honor any court order to freeze any joint account. These entities don't want to incur any potential liability by ignoring any court order.
  • Shut Down Any Lines of Credit: Once a divorce starts, then it is imperative that all home equity lines of credit must be immediately closed. Moreover, any joint credit cards also should be shut down asap. A person is "playing with fire" if he keeps a home equity line of credit open during a divorce case. You don't want to be shocked and open up your credit card statement to see that you have just paid for wife's trip to Cancun with her new boyfriend.

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