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Property division is often a contentious issue in California divorces. Sometimes, a spouse might even intentionally take measures to reduce the amount of property the other would be entitled to receive after divorce. A spouse might wrongfully misuse marital funds by gambling, shopping, spending money on extramarital affairs, or by selling properties for less than their value. Referred to as "wasteful dissipation of marital assets," this type of economic misconduct may be considered by the court when determining how property should be divided between the spouses.
Simply put, "wasteful dissipation of marital assets" means squandering marital money or property wrongfully or foolishly. In some highly contested cases, a spouse may vindictively engage in this kind of behavior to prevent the other from obtaining their fair share of the divorce settlement. A spouse may begin to spend excessively once they realize divorce is imminent or after divorce proceedings have been commenced.
Importantly, wasteful dissipation of marital assets is not necessarily the same as maintaining a lavish lifestyle. If the spouses enjoyed a certain standard of living throughout the marriage, it might be difficult to identify what constitutes normal expenditures versus excessive spending. Generally, to support a claim for economic misconduct, a spouse must demonstrate to the court that the amount of assets wasted was unusual, frivolous, and did not benefit the marriage. If the spending spree only began after the spouse was served with divorce papers, there may be a valid claim for wasteful dissipation of marital assets.
Many people think of wasteful dissipation of marital assets in terms of money spent on extramarital affairs. However, there are many ways willful dissipation of assets can occur. Purchasing expensive gifts for paramours, maxing out credit cards, purchasing luxury vehicles, and transferring large sums of money to family members may all be forms of economic misconduct that the court will consider.
Marital assets can also be dissipated by fraudulently conveying property, diverting marital funds to pay for an addiction, or engaging in other financial behaviors that would make it difficult for a court to determine how to divide property fairly. The court may also look to whether a spouse failed to preserve assets deliberately, such as by not making mortgage payments.
Critically, there are a few red flags that can indicate whether marital assets are being dissipated. In some situations — such as those involving substantial purchases — it can be obvious and blatantly appear on credit card or bank statements. But when the wrongdoing is concealed, it may be necessary for a forensic accountant to evaluate financial records and conduct a thorough investigation. If economic misconduct is uncovered, it can discredit the spouse who committed the wrongdoing and be used as powerful leverage in settlement negotiations.
While the term "restraining order" has certain connotations associated with violent behavior, in a divorce, it also applies to the financial activities of the spouses. When divorce proceedings are commenced in California, four automatic restraining orders immediately go into effect, and are included with the Summons served on the defendant spouse. These orders prohibit the spouses from taking certain actions that would alter the financial status quo.
As soon as a spouse files for divorce, both spouses are specifically prohibited from:
Once the restraining orders go into effect, a spouse is required to notify the other concerning any "proposed extraordinary expenditures" at least five days before they are incurred — as well as inform the court. A spouse who violates these orders could be held in contempt.
California is a community property state. This means that each spouse owns one-half of all the property acquired during the marriage — and are each responsible for half of the debt. Community property is usually divided equally in a California divorce, unless otherwise agreed upon. Separate property is that which was acquired by each spouse before the marriage and is generally theirs to keep after a divorce.
Significantly, California courts will consider a spouse's economic misconduct in determining how community property should be divided. If a judge finds that a spouse dissipated marital assets, they may award a higher percentage of the property to the other as a restorative measure to counterbalance the misuse.
Property division in a California divorce can be complex — and it can become even more complicated if a spouse is dissipating marital assets. When faced with divorce, it's critical to have an attorney on your side to protect your legal rights. Guiding clients through the divorce process, The Law Offices of Rick D. Banks provides skillful representation and strategic counsel to help achieve a positive outcome in every case.
The Law Offices of Rick D. Banks has been assisting clients throughout Fresno and the surrounding area with their divorce and family law matters for more than 20 years. To schedule a no obligation consultation, call (559)222-4891.