An essential part of a New Jersey divorce is equitable distribution. It involves identifying, valuing, and fairly distributing joint marital assets and debts. One way for your X2B to put a thumb on the scale is to waste or dissipate joint marital assets during the separation and divorce.  Sometimes, one party spends liquid assets or charges a joint credit card on a vacation or a sports car.  The thought is, they will enjoy the purchase with the hope that you will share in 50% of the expense – through drained assets or a bigger credit card bill.  How can you deal with this problem successfully?

What is Equitable Distribution?

Equitable distribution’s purpose is to make a divorce as materially fair as possible between the spouses. Both sides split the assets and resources fairly to help them start their lives again. New Jersey law spells out factors for a judge to consider for this balancing act, including this one:

The contribution of each party to the acquisition, dissipation, preservation, depreciation[,] or appreciation in the amount or value of the marital property, or the property acquired during the civil union as well as the contribution of a party as a homemaker…

The parties negotiate property issues, whether directly or through their lawyers, or through supervised negotiations in mediation, or by arbitration, or at trial if nothing else works.

Before deciding on an equitable distribution award, the negotiators or the arbitrator or the trial court decides which property or debts are truly marital and which belong to the spouses separately. If allocation is warranted, the parties or arbitrator or judge must decide the following:

• What property is eligible for distribution?
• What is its value for distribution purposes?
• How to equitably make the allocation?

There’s a presumption property or debts acquired during a marriage are joint assets/debts and will be subject to equitable distribution. There is no presumption in New Jersey law that the assets and debts will be divided and distributed 50-50, although most times that is exactly what happens. The spouse claiming property or debts should not be divided has the burden of proving that.

What Are Waste and Dissipation?

As in most marriages, until separation or divorce, both spouses can spend or save whatever they want, subject only to the other party’s possible veto, hopefully amicably. If divorce is on the horizon, however, extravagant spending or debt creation that only benefits one spouse becomes suspect, because it shrinks the marital estate.  Unless s/he challenges the expense, the non-spending spouse could get a reduced share of marital assets or an increased share of marital debts.

Dissipation can be defined as the use of marital property:

• For one spouse’s benefit
• The purpose is unrelated to the marriage
• While the marriage is already in jeopardy=

State courts have found the following as examples of challengeable dissipation or waste:

• Funds sent outside the US to a spouse’s family while the two consider getting divorced
• Intentional poor maintenance of a joint asset, like the house, thereby decreasing its value
• After the divorce complaint is filed, one party’s selling off marital assets to pay personal debts or family support obligations

Dissipation probably will not be found in the following circumstances:

• Bad business decisions, if made as part of a good faith effort to preserve marital assets
• Losing money in the stock market, if there’s no intent to dissipate assets
• Spending for non-marital purposes when the marriage is intact

These cases are very fact-specific and focus on intent. Liquidating stocks to generate cash to buy something only one spouse will benefit from differs from using it to help a closely held business.

How Do You Prove Dissipation?

When courts decide what is or isn’t dissipation, they’ll consider the following factors:

• The timing of the spending relative to the parties’ separation
• Whether the spending is typical of what occurred while the marriage was intact
• Whether the expenditures benefited the marriage, or one spouse benefited to the exclusion of the other
• The amount and need for the spending: unusually large expenses relative to the marital lifestyle will be more suspect

Like other divorce issues, decisions on the dissipation of marital assets are fact-driven.

What are the Consequences If Dissipation Is Proven?

The disadvantaged party can seek recovery as part of the divorce action, perhaps including the property dissipation or waste issue in the Divorce Complaint, and asking the Judge to do the following:

• Add the dissipation or waste value back to the asset or column and give the disadvantaged party a credit for the reduced value or increased debt, with the malefactor paying the difference
• Asking the Court to order the advantage-taker to desist and hold the disadvantaged party harmless from further losses, including counsel fees and costs for the disadvantaged party to defend
• Your spouse could increase his/her payment of spousal support
• You’ll receive a greater share of the marital assets
• Your spouse will be responsible for a greater share of your marital debt

The goal is for the disadvantaged spouse to be “made whole” for the other spouse’s misconduct.

Can Dissipation Be Prevented?

The following may be practical steps to prevent your spouse from spending marital assets on themselves:

• Notice of Lis Pendens: This can be filed against real estate that is connected to the divorce action. It gives third parties a warning that the filer has a claim against the property and not to buy it without finding out the details.
• Order to freeze accounts: The court may issue an order that both parties shall not dissipate, withdraw, use joint credit, or use remaining marital assets to create equity
• Shut down open lines of credit: Both parties may have signed on for joint credit cards or a home equity line of credit. Joint credit cards and lines of credit should be closed promptly.

An ounce of prevention will assure a pound of cure.  This is especially true if the marital estate is sizable, complex, or both.

Are You Thinking About a Divorce — or Already Committed to It?

Either way, contact us and arrange for a near-term initial consultation at a reduced hourly rate. We will listen to your facts, explain the law, and suggest right and reasonable approaches for your children and you. We are “Compassionate Counsel, Tough Advocates.  We are ready to help you! Call us at 609-683-7400 or contact us online. Call today. You will be glad you did.