Spending Money and Assets Prior to a Divorce
(Thinking About Spending Everything so your Spouse Doesn’t Get Anything in a Divorce?)
Whether it was a surprise or discussed in advance, and whether you’re the one filing the petition or receiving it, divorce is a stressful and painful process. Oftentimes, one or both spouses ends up feeling like the victim in the situation. They may lash out by making extravagant purchases in an attempt to empty any shared bank accounts before the divorce is finalized. Arizona is a community property state, meaning all assets and debts acquired during the marriage are shared between the spouses. This means there are consequences for a spouse who chooses to recklessly spend money when facing divorce.
Making Big Purchases Prior to a Divorce
This is referred to as “dissipation of assets,” or committing “marital waste.” Common examples of dissipation of assets include:
- Spending money on a romantic interest outside of the marriage, like lavish gifts, trips, or paying their living expenses
- Casino and other gambling debts incurred in response to the divorce
- Racking up credit card debt on a shopping spree
- Transferring assets to a friend or family member, or selling assets for far less than they are worth (e.g., selling your friend a community property vehicle for $5)
- Luxury vacations, especially when taken with anyone besides the other spouse
- Even smaller expenditures like frequent moviegoing and new hobby classes can be considered dissipation of assets if the spending represents a large enough portion of the spouses’ total budget.
What If My Spouse Spends a lot of Money Before or During a Divorce?
You should discuss the possibility of including a financial restraining order when you file your divorce petition. This will put a freeze on your marital assets once the divorce petition is filed. However, this will do nothing to stop your spouse from dissipating assets before the petition is filed.
If your spouse spends recklessly before the divorce, the court may be able to make up for it during asset division. Collect records of spending before and during the dissipation period. For example, if you show that your spouse gave his mom $3,000 as a gift right before the divorce, but had never given a similar gift before, this may prove intentional reckless spending to the court. If your wife used to spend about $300 per month at salons, fitness classes, and clothing shopping and this suddenly increases to $1,000 per month, the court will be able to see the dissipation of assets. Depending on how much your spouse wasted, you may be awarded marital assets without having to buy out your spouse. However much your spouse wasted will be deducted from their share of community assets.
If you are concerned about your spouse spending recklessly in sight of a divorce, you may want to consider setting up a separate bank account in which to deposit your earnings. Avoid opening joint credit cards and close any joint accounts if possible. Change the passwords to your separate financial accounts.
Don’t Make Emotional Purchases
This isn’t to say that an impending divorce means that you can’t go get a massage or a new outfit. However, you should refrain from buying that vintage sports car or Chanel lambskin purse you’ve always wanted. If your spouse brings a dissipation claim against you, you will both end up spending thousands of dollars more on attorney’s fees. If your spouse is successful in the dissipation claim, you could end up losing out on marital assets that are more valuable than your impulse purchase.
Things Not to Do Before Getting Divorced
Besides not recklessly spending community assets immediately before a divorce, there are other things you should avoid doing so your divorce can proceed as smoothly as possible:
- Don’t fail to keep clear financial records: Document you and your spouse’s spending as far back before the divorce as possible. Create an inventory of the items in your house to make sure valuable goods aren’t given away or sold. If applicable, note which ones are your separate property.
- Don’t send your spouse nasty texts, emails, phone messages, etc. Remember all of these communications may be heard as evidence in court. The same goes for social media posts, so keep your divorce drama off of Facebook, Instagram, and Twitter.
- Don’t lie to your attorney. Assets, adultery, substance abuse, and other marriage issues will come up during your divorce and only delay your case and cost you extra attorney’s fees if you fail to disclose them to your attorney yourself.
- Inversely, don’t delete any nasty messages you receive from your spouse during the divorce, as you may want to use them as evidence in later proceedings.
- Don’t involve a new romantic partner in the proceedings. Bringing a new boyfriend or girlfriend around your children can be used against you in future custody proceedings if that person is proven to be a bad influence on your children. Bringing that new partner to attorney meetings and divorce hearings will only cause unnecessary drama.
- Don’t disparage your spouse to your children. Purposefully trying to damage your children’s relationship with their other parent is known as parental alienation, and can be used against you in future custody proceedings.
- Don’t listen to friends’ and acquaintances’ advice about your divorce, or at least take it with a grain of salt. Your hairdresser or plumber probably doesn’t have as firm of a grasp on Arizona family law as your divorce attorney. There are plenty of factors that may seem minute to a layman that could have a great impact on a divorce, making it less applicable to your situation. When in doubt, don’t discuss your divorce with anyone besides your immediate family and any divorce attorneys, financial advisors, and other professionals who are involved.
- Don’t make any major financial decisions before consulting both your divorce attorney and a tax advisor or other financial professional. There are many nuances to the financial aspects of family law- for example, alimony payments are tax deductible while child support payments aren’t. You need to understand how potential divisions of your assets will impact your taxes and future financial situation.
- Don’t forget to review documents that list your spouse as your beneficiary or power of attorney. You may want to change the person designated in these documents to someone besides your future ex spouse.
Getting Money Back that was Wasted in the End of a Marriage or During a Divorce
Recovering funds that your spouse before or during the divorce isn’t as simple telling the judge what happened. There is a formal procedure you must follow to get back money that your spouse wasted. As with any legal matter, you can proceed self-represented, but your chances of success are vastly improved with attorney representation.
Your Arizona Divorce Attorney may recommend that you hire a forensic accountant to review your financial records to prove dissipation of assets, otherwise you will need to gather evidence to show this yourself. Your spouse will need to submit a financial disclosure as part of the divorce, but you may also submit requests for production of additional documents. Spreadsheets are the preferred method of displaying financial records. Show credit card records, income, financial expenditures, and categorize the type of spending. You should check with an attorney to see how far back you can claim financial dissipation, and how long you have to bring the claim.
The burden of proof will be on you in court to prove that your spouse’s divorce spending was indeed dissipation of assets. If you have met the burden, your spouse will need to explain their purchases. Usually, the divorce itself is used as an excuse for excessive spending. An experienced divorce lawyer will be helpful in making sure your spouse maintains responsibility for reckless divorce spending.
Asset Division in Your Divorce
How you will be repaid through asset division after proving dissipation of assets can be confusing. The simplest way to explain it is by using a community property bank account with an initial balance of $20,000 as an example. Each spouse would be entitled to $10,000 from this bank account upon divorce. If one spouse goes on a spending spree and depletes the account to $10,000, each spouse would get $5,000. The other spouse would need to make a dissipation claim, and if successful, that spouse would get the entire $10,000 remaining balance and the dissipating spouse would get nothing.
Be wary of your spouse offering to pay community debts as a means of reparation for financial dissipation. If your spouse files bankruptcy and discharges these debts, these creditors may still pursue you for collection.
The losing party in a dissipation claim may file an appeal after the judgment has been made. The appeal must be made within a certain time frame and meet court guidelines, so proceeding without an attorney in appeals is nearly impossible. The attorney will need to prove to the appeals court that the judge abused her discretion in the dissipation claim.
Contact an Experienced Arizona Family Lawyer
If you are concerned that dissipation of assets may be an issue in your divorce, call to speak with one of our experienced family law attorneys. Our attorneys have spent years representing clients in similar claims with positive results. We refuse to allow our clients to be victimized by a divorce and represent dissipation claims with persistence and expertise. We also offer competitive rates and affordable monthly payment plans. The initial consultation is free and can be held over the phone. Same day consultations may be available, so call to schedule today.