In a divorce, can you recoup monies “pissed away” by a spouse on things unrelated to the marriage or can you hold a spouse accountable for specific debts incurred in advance of a divorce filing? Or, what if your spouse hid assets during the marriage. Can you recoup those monies in a divorce? The answer to each of those questions is YES, YOU CAN, and reliance is found in NJ’s equitable distribution statute and in a whole body of case law dealing with that subject.
In New Jersey, a spouse’s dissipation, depletion or waste of marital assets can be considered by the court when dividing the remaining marital assets, pursuant to N.J.S.A §2A:34-23.1(i):
i. The contribution of each party to the acquisition, dissipation, preservation, depreciation or appreciation in the amount or value of the marital property, or the property acquired during the civil union as well as the contributions of a party as a homemaker; (emphasis added)
Unfortunately, many if not most people are unaware of their “right” to assert a claim of “waste” when discussing the division of the remaining assets and liabilities. In the right case, not only do you have the right to assert the claim but the right to have an unequal division of the remaining assets and liabilities to address that “bad behavior”. The most common “dissipation” claim is where it is clear that the marriage has broken down and one party is spending marital money on a girlfriend or boyfriend or goes away with friends to Vegas and blows a significant amount of marital monies at the craps table. In either or both of those settings, if the amount of money expended is significant, it may be worth pursuing a claim of recoupment in the divorce.
Two seminal cases in New Jersey addressing the issue of dissipation of marital assets are Siegel v. Siegel, 241 N.J. Super. 12 (Ch. Div. 1990); and Kothari vs Kothari, 255 N.J. Super. 500 (App. Div. 1992)
The difficulty in determining what can be recaptured as “dissipated” marital assets or what can be viewed as an improper debt, is proving to the court that the expended assets / liability was intended as a “fraud” on the other spouse’s marital rights – meaning the assets were “dissipated” by one spouse in efforts to diminish the other spouse’s share of the marital estate.
A wide variety of factors are considered by the courts in trying to determine if the actions give rise to a dissipation claim with the following four factors, being the most common:
- The proximity of the expenditure to the parties’ separation;
- Whether the expenditure was typical of expenditures made by the parties prior to the breakdown of the marriage;
- Whether the expenditure benefitted the “joint” marital enterprise or was for the benefit of one spouse to the exclusion of the other; and
- The need for, and amount of, the expenditure.
After weighing the evidence presented against these four factors, the court will then decide if it believes that the “assets were expended by [the dissipating] spouse with the intent of diminishing the other spouse’s share of the marital estate.” If so, the court can add those funds back to the marital pot for equitable distribution purposes, as if they were never wasted in the first place. The same logic applies when addressing the issue of debts and whether they should be charged against one party or the other or divided equally.