In Virginia, a spouse who misuses or deliberately disposes of marital property to purposefully deprive the other spouse of their share upon divorce has committed “marital waste” or “dissipation of assets.” The court has the authority to consider such behavior in making an equitable distribution award.
But how does the court know when marital waste was purposeful? The general rule in Virginia, stated in Booth v. Booth, 7 Va. App. 22, 371 S.E.2d 569 (1988), is that “waste may be generally characterized as the dissipation of marital funds in anticipation of divorce or separation for a purpose unrelated to the marriage and in derogation of the marital relationship at a time when the marriage was in jeopardy” (emphasis added).
Marital waste 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 The aggrieved spouse must only show that the funds were withdrawn or used by the other spouse.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.
Consideration of Marital Waste in Equitable Distribution
If the parties are unable to settle their case through negotiations and proceed to an equitable distribution hearing, 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. This means that, 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 the court finds that marital waste occurred in anticipation of separation or divorce, or after the parties last separated, 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 (before it was reduced in value by the marital waste), rather than the value of the asset as of the date of the divorce trial.
Examples of Marital Waste
The following examples should illustrate what is and is not marital waste, although every case depends on the individual facts and circumstances:
Example 1: Husband has been struggling lately to meet expectations at work and at home. He decides to take a trip to Atlantic City with some friends to get away from it all. Unfortunately, while there, he ends up losing $10,000 at the craps table. Wife decides that she has had enough of Husband’s irresponsible behavior, and files for divorce. Can Wife argue that Husband dissipated $10,000 from marital funds?
Answer: Probably not. There is no evidence in this scenario that Husband gambled away the money in anticipation of divorce or separation.
Example 2: Husband and Wife have been separated for a few months now and are in the process of divorce. Husband learns that Wife emptied $40,000 from their child’s college fund. When Husband asks Wife about it, she tells him that she gave the money to a relative to pay off a loan. Can Husband argue that Wife dissipated $40,000 from marital funds?
Answer: Probably yes. Here, there is evidence that the marital funds were used in anticipation of divorce or separation, and the funds were used for a purpose unrelated to the marriage.
Example 3: Husband and Wife have filed for divorce and are awaiting their equitable distribution trial. Through the discovery process, Wife learns that Husband has cashed out $20,000 from his 401(k) plan to pay his attorney’s fees to litigate the divorce. Can Wife argue that Husband dissipated $20,000 from marital funds?
Answer: Probably not. Although the funds were spent in anticipation of divorce, courts have often found that payments for reasonable living expenses, support, and attorney’s fees do not constitute waste.
Finding Evidence of Marital Waste
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 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. Livesay & Myers, P.C. has a team of experienced family lawyers across offices in Fairfax, Arlington, Leesburg, Manassas, and Fredericksburg, representing clients across Northern Virginia. Contact us to schedule a consultation today.