Marital Waste in Virginia Equitable Distribution Cases
In Virginia, a spouse who spends or disposes of marital property for an improper purpose (a) anticipating a separation or divorce or (b) after the final separation of the parties may have committed “marital waste.” The court has the authority to consider such behavior in making an equitable distribution award.
Marital waste (or “dissipation of assets”) typically occurs when one party transfers funds out of a marital account or otherwise misuses marital funds after the marriage begins deteriorating. The aggrieved spouse must only show that the funds were withdrawn or used by the other spouse. The burden of proof then shifts to the alleged wrongdoer to prove by a preponderance of the evidence that the funds were spent on a proper purpose. It should be noted that Virginia courts have held that spending money on living expenses post-separation does not usually constitute waste.
If the case is unable to be resolved through settlement and proceeds to litigation, the court will take marital waste allegations into consideration when determining how to divide the property and debts of the parties. Virginia Code § 20-107.3(E) provides a list of factors that the court will consider when making its equitable distribution decision, including: “[t]he use or expenditure of marital property by either of the parties for a nonmarital separate purpose or the dissipation of such funds, when such was done in anticipation of divorce or separation or after the last separation of the parties.” The key statutory language here is that the waste or dissipation needs to have occurred in anticipation of separation or divorce, or after the parties last separated.
Quite often, one spouse suspects that the other has wasted or dissipated marital assets, but does not have proof. How can a spouse uncover the other’s waste? Hopefully, both parties have had access to all of the financial accounts throughout their marriage and any potential waste can be quickly identified. Regardless, each party will likely be obligated to produce all financial statements during the discovery process. If the aggrieved spouse believes the other has not been forthcoming in discovery, he or she may also subpoena the financial institution or other entity for the desired statements. The aggrieved spouse may then use the relevant financial statements and other documentation to identify the waste. This is just one of the reasons why a thorough review of discovery production is essential in divorce cases.
If the court finds that marital funds were used for an improper purpose, such as for one party’s sole benefit, then the court may grant the aggrieved spouse a monetary award during equitable distribution. This is usually accomplished by using an earlier valuation date of the asset, rather than the value of the asset as of the date of the divorce trial.
Example. Suppose a married couple have a joint savings account with a balance of $100,000 in marital funds. The marriage starts going downhill and the husband transfers $25,000 out of that joint account into a new bank account in his name alone, just in case things do not improve with his wife. The parties end up separating, filing for divorce, and eventually find themselves in an equitable distribution hearing in court. At the time of the hearing, the balance of the savings account is only $75,000: the original $100,000 balance less the $25,000 withdrawn by the husband.
If the wife intends to claim that the husband wasted or dissipated $25,000 from their joint savings account, she would need to identify the transfer through bank records. The burden would then shift to the husband to show that the funds were used for a proper purpose. If the husband could not prove that such a purpose existed, the court would use an earlier valuation date when dividing the asset, for example the $100,000 balance in the account before the husband withdrew the $25,000. If the court determines that the funds are to be split 50/50, then the wife would receive $50,000 from the current $75,000 balance of the joint savings account, while the husband would receive $25,000.
It is important to remember that, as mentioned earlier, to be considered waste or dissipation the property must have been used or spent either in anticipation of divorce or after the separation of the parties. Therefore, if one spouse spends frivolously during the marriage, but this spending is not in anticipation of divorce or separation, then it will probably not be considered marital waste in equitable distribution.
If you suspect that your spouse has wasted or dissipated marital assets, consult with an experienced family law attorney to discuss the potential impact it may have on your divorce case. From offices in Fairfax, Leesburg, Manassas and Fredericksburg, the family lawyers at Livesay & Myers, P.C. represent clients throughout Northern Virginia. Contact us to schedule a consultation today.