The term “wasteful dissipation” is not one used in casual conversation, so when it comes up in the context of divorce, it confuses many people. It is important to understand how it is defined by California courts and the impact it can have on divorce.
While California laws put certain measures in place designed to prevent wasteful dissipation, it still occurs far more often than most people expect. Understanding the definition and the effect of wasteful dissipation can help prevent you from losing out on resources in divorce.
Defining Wasteful Dissipation
The California Family Code does not specifically define wasteful dissipation. Courts have defined the term in generally similar ways. Essentially, when one spouse uses marital community assets for a wrongful purpose, that can be considered wasteful dissipation. It is generally an issue only raised in divorce, but it could potentially be part of a postnuptial agreement.
A wrongful purpose might be something illegal or something that is simply excessive and that benefits one spouse while denying the other to gain an advantage in divorce.
Some examples include:
- Buying gifts for and paying for vacations taken with someone a spouse is having an affair with
- Spending excessive amounts on drugs or partying
- Gambling
- Going on crazy shopping sprees
- Selling property to a friend for less than face value or giving extravagant gifts to friends
With gifts to friends or family members, there is an often assumption that the gift recipient is just holding the property temporarily and will give it or some other benefit to the spouse when the divorce is over, so that is effectively trying to cheat the system and gain an unfair share of marital property during divorce.
The Effect Wasteful Dissipation Has on a California Divorce Case
Property that spouses acquire during a marriage are considered to be owned equally by both of them. Debts that are created during the marriage are also considered to be the equal responsibility of both spouses. This is generally true even for assets acquired only by one spouse, such as a spouse’s earnings, or debts created solely by one spouse, such as when a spouse goes shopping. If either spouse buys a new swimsuit for $60 and pays for it with a credit card, for instance, both spouses are fully responsible for paying the bill, even though only one of them can actually wear the suit. In divorce, the debt would be divided so that each spouse owed $30.
When spending is considered wasteful dissipation, the situation changes. The debts run up by a wasteful spouse might be allocated entirely to that spouse. If the swimsuit was part of a shopping spree that involved buying 60 swimsuits for $6,000, that would be unnecessary, extravagant, and wasteful. A judge might decide that the spouse who took on this debt should be responsible for paying for all of it.
Alternatively, the court might award the other spouse an extra share of marital property to make up for the waste, particularly if the bill has already been paid. The California Family Code allows the court to award an amount of community property determined to have been “deliberately misappropriated” by one spouse to the detriment of the other spouse.
Automatic Temporary Restraining Orders
Once a divorce petition has been filed, California law places an Automatic Temporary Restraining Order in effect which is supposed to prevent either spouse from taking extreme actions such as emptying out a bank account or selling off major assets. However, this does not help a spouse who is dealing with wasteful spending that occurs before the divorce petition is filed, and the order may not prevent all wasteful dissipation.
Proving and Disproving Wasteful Dissipation
It is important for a spouse who suspects their partner has been spending recklessly or wastefully to collect as many financial records as possible to prove what spending has occurred and how it is out of line with the typical spending patterns during the marriage.
If you have been accused of wasteful dissipation, you also need to gather and preserve financial records. You may be able to demonstrate that your spending has been normal throughout the marriage or that unusual expenses had a particular purpose for your business or to meet family needs. For instance, if a spouse alleges that you bought jewelry or fancy sports equipment for someone you were having an affair with, you may be able to show that you used the property yourself or that the gift was given to a family member or as a legitimate business favor.
Holstrom, Block & Parke Can Protect When Wasteful Dissipation Issues Arise in Divorce
Allegations that a spouse has wasted marital assets can be very complex to resolve, and often require the use of forensic accounts to piece together spending patterns and transaction history. At Holstrom, Block & Parke, APLC, our Certified Family Law Specialists and associates know how to protect financial interests in complex situations, and we can investigate to present the best evidence to support your interests if wasteful dissipation is an issue. Contact us today for a confidential consultation to learn more.
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