Wednesday, July 18, 2012

Dissipation of Assets: Where Did my Stuff Go?

It comes as no surprise to anyone that people in divorces get angry. But sometimes that anger manifests in ways that destroy property, and also not surprisingly, it is usually the property desired by the other spouse. This is one particular kind of dissipation of marital assets, which involves reduction or destruction of any marital property. This blog post will discuss how this sort of behavior is treated by the legal system.

Now, because money makes the world go 'round, that is what most of the cases discuss, rather than the items a jilted ex-spouse burns or sells or just throws away. But the principles still apply, and if this sort of destruction meets the definitions and analysis behind dissipation of marital assets, there will be consequences to these actions. There are really two types of cases out there: those where one party took assets belonging to both, and those where one party increased the debts attributable to the couple. 

The increase of debt cases are actually more simple, as the test used by the Court is more straight-forward. It is a two-step process: the Court first considers whether the states purpose for the debt is supported by evidence, and then considers whether those reasons were "dissipation," or basically whether they were unjustified under the circumstances. This second step involves considering such things as the the timing of the debt, whether such debt was usual for this marriage, if the expense benefited both spouses, the need for the expenditure, and the timing of the expenditure. In re Marriage of Fennelly and Breckenfelder, 737 N.W.2d 97 (Iowa 2007). For instance, in that case, the husband accumulated lots of debt, allegedly for his business and living expenses, but failed to show any proof of those expenses. The Court therefore agreed this debt was a dissipation of assets because it was unreasonable, and the husband was charged with the full amount. 

Spending marital money by one spouse without the permission or input of the other spouse is the most typical way dissipation of assets occurs. This basically boils down to use of marital money for unauthorized use, whether that be pure waste, like gambling, or intentionally hiding money for later use. But use of marital funds for debts of the couple is allowed. For instance, use of the couple's savings for living expenses or to pay tax debts was not dissipation of the marital assets. In re Marriage of Snell, No. 0-346/99-1524 (Iowa App. 2000). Similarly, payment of prior spousal and child support obligations out of joint marital funds was allowed; the wife knew those debts existed when she married husband, and they had been paid out of joint assets during the marriage. This was not improper use of joint savings. In re Marriage of Burgess, 568 N.W.2d 827 (Iowa App. 1997).  To be dissipation, it had to be a waste of assets prior to the district court determining ownership of assets. Id. 

In order to get the benefit of using this money on marital expenses, however, the spouse must be able to account for it. Thus, where the husband had control over the assets of the marriage, including a lot of property and cash inherited by wife, and could not account for where it had gone, he would be charged with dissipating marital assets, and wife would get a larger property settlement. In re Marriage of Martens, No. 3-997/03-549 (Iowa App. 2004). Gambling can be considered a dissipation of marital assets when extreme and unexpected. In re Marriage of Bell, 576 N.W.2d 618 (Iowa App. 1998). 

Gambling is not always dissipation, however. In re Marriage of Schwegman, No. 1-125/10-1420 (Iowa App. 2011), involved husband's taking of over $30,000 from a joint savings account, without the ability to account for all of it. The Court gave the wife extra money due to this lack of explanation, but the husband argued that she had, during the marriage, spent lots of money on gambling. But there was little proof her gambling, and this was a hobby they had enjoyed together while married. Therefore, she was not held accountable for her gambling losses, but he was held accountable for his expenses of marital savings. 

However, the Court has been clear that the intention of this process is to equalize the finances of the parties, and not to punish bad behavior. So spending marital assets during the marriage on alcohol was not dissipation of marital assets in Marriage of Snell, supra. 

Please note, however, that money is all we have to make these injustices right. So even if you lost your favorite t-shirt, you are going to get credit for the value of the t-shirt. Nothing is bringing that particular shirt back. When it comes down to it, money is almost always what is on the line.