Unfortunately, as matrimonial attorneys we often hear many tales of woe, including how one spouse either spent a large sum of money immediately before commencing a divorce action or eliminated their assets to avoid having to give their spouse any piece of the proverbial marital property pie. In legalese, we refer to this as “wasteful dissipation.” In this first installment of a two-part series, we will identify and examine what is considered wasteful dissipation, which can be considered by a court in its determination of equitable distribution (the division of marital and non-marital property in a divorce) and maintenance (the payment of support for the benefit of a non-monied spouse by a monied-spouse).
What is Wasteful Dissipation?
Wasteful dissipation is exactly as it sounds, it is the wasteful dissipation or depletion of marital assets (generally, assets obtained during the marriage). Although there is not a hard and fast rule as what constitutes wasteful dissipation, it is clear that wasteful dissipation of assets can occur through both positive conduct and as a result of inaction. Examples of positive conduct that has been found to be wasteful dissipation of assets are:
- Active efforts to diminish the value of a business;
- Gambling with marital assets;
- Using marital assets to further an extramarital affair;
- Abandoning a lucrative professional career; and
- Making payments of marital money to emancipated children.
While these are just a few examples, it gives you an idea of what will likely be deemed as wasteful dissipation in the context of a divorce. In addition, the following are examples of ways a party can dissipate assets without taking any positive action:
- Failure to take reasonable steps to preserve the value of assets;
- Failure to reasonably manage investments;
- Refusal to reduce mortgage payments on a marital residence by agreeing to refinance the home; and
- Refusal to obtain employment during the latter part of the marriage.
However, just because a spouse undertakes, or fails to undertake certain actions, does not necessarily mean that a court will hold that the spouse wastefully dissipated marital assets. For example, just because a spouse used marital funds to gamble, does not automatically mean a court will find wasteful dissipation. In a 1998 case, the Third Department found that the wife’s argument that the husband’s gambling activities resulted in dissipating $110,000 in marital assets was not supported by the record, even though the husband admitted that prior to the parties’ separation he unilaterally took and used marital funds to gamble.[i] The court held that there was no evidence that he lost those funds gambling.[ii]
Factors Considered by Courts Prior to Determining Whether Wasteful Dissipation Occurred
As shown above, simply because a party gambles, or engages in certain behavior, does not necessarily mean a court will find that he or she wastefully dissipated assets. Instead, courts will often consider a variety of factors prior to making its determination, including:
- the intent involved in the commission of the act;
- Concealment of a wasting of assets;
- Use of the asset by one spouse only or by both spouses for marital purposes;
- Joint dissipation of property, regardless of purpose;
- Time of commission of act (i.e., before or after commencement of the divorce action);
- Access to the asset by one or both parties;
- Existence of the asset at the time of distribution;
- Whether the act constitutes waste in hindsight only;
- Whether the “guilty” party obtained a profit by the act;
- Failure to support the family due to the alleged wasteful dissipation;
- The relationship between the alleged waste and the parties’ overall financial status.
While this list is not all inclusive, it also provides some insight as to certain criteria courts will consider.
So what does this all mean?
Wasteful dissipation, when it exists, can have serious effects on equitable distribution and maintenance awards. Stay tuned for our next installment in this series to understand how wasteful dissipation can affect the equitable distribution and maintenance components of a divorce case.
The material in this blog is only meant to provide general information and is not a substitute nor is it legal advice to you. Readers of this article should seek specific legal advice from legal counsel of their choice. In the event that you need legal assistance, please contact Marissa Pullano at firstname.lastname@example.org or (516) 393-8297 or Samantha Guido at email@example.com or (516) 393-8250.
[i] Treffiletti v. Treffiletti, 252 A.D.2d 635, 636-37 (3d Dep’t 1998).
[ii] Id. at 637.