How Wasteful Dissipation of Assets Can Affect Equitable Distribution

In New York divorce proceedings, the spouses’ marital assets are divided using the process of equitable distribution. This involves the court’s weighing of several factors to determine a fair but not necessarily equal split. One of the factors considered is whether either spouse is at fault for wasteful dissipation — that is, deliberately squandering, concealing or mismanaging marital assets for a purpose unrelated to the marriage. When this is shown to have occurred, the court can take remedial measures to ensure fairness to the innocent spouse. 

Common examples of wasteful dissipation of marital assets are:

• Excessive gambling with marital funds — One spouse habitually gambles substantial sums from joint accounts, especially once divorce appears imminent.
• Spending lavishly on an extramarital affair — Money is channeled towards gifts, vacations, hotel stays or luxury items for someone outside the marriage and are often kept secret.
• Selling assets below market value — A spouse might try to ‘help’ a friend or relative by transferring marital property for far less than its true worth, diminishing the marital estate.
• Transferring property to third parties to conceal it — Often, property is shifted into the names of friends, family or shell entities to hide assets from the equitable distribution process.
• Large, unauthorized gifts or purchases — One spouse might make sizable gifts, donations or purchases without the other’s knowledge or consent just before or during the divorce.

In a precedential case, Mahoney-Buntzman v. Buntzman, the New York Court of Appeals affirmed that the wasteful dissipation of marital assets is a valid consideration in dividing marital property. If a spouse is found to have intentionally diminished the marital estate, a divorce court has the authority to award a larger portion of the remaining assets to the innocent spouse to compensate for the value that was lost through the dissipation. 

However, not every instance of high spending or poor financial judgment qualifies as wasteful dissipation. For example, a spouse might simply have made risky investments or have spent more lavishly than the other partner approved of. To constitute wasteful dissipation, the spouse must have clearly intended to deplete the marital estate for non-marital purposes. The issue of dissipation is a question of fact for the court, requiring a careful look at the circumstances, motives and timing of the transactions. Both parties have the opportunity to present evidence and arguments.

Establishing both the occurrence and the amount of dissipation is critical to persuading the court to adjust the distribution of marital property accordingly. A skilled New York equitable distribution attorney can thoroughly investigate suspicious asset transfers or expenditures, gather relevant evidence (such as bank records, receipts, email correspondence, and witness testimony) and work with forensic accountants to trace and quantify the assets lost. 

The attorneys at Jakubowski, Robertson, Maffei, Goldsmith & Tartaglia, LLP in St. James, NY work with clients across Long Island to address the financial complications they experience after divorce. To learn how we can help you, contact us online or call us at 631-360-0400.