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Diamond & Diamond, P.A.


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Recapturing Dissipated Marital Assets for Purposes of Equitable Distribution

| Aug 16, 2019 | Division Of Assets, Divorce, Equitable Distribution, New Jersey Family Law |

In New Jersey, a spouse’s actual “dissipation” of marital property is a relevant factor to be considered when dividing the marital estate, pursuant to N.J.S.A §2A:34-23.1(i), which says:

  1. “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)

“Dissipation” of marital property, as used in this statute, is intended to be a flexible term, “suited to fit the demands of the individual case.” Kothari v. Kothari, 255 N.J. Super. 500, 506 (App. Div. 1992).

Generally, to justify the inclusion of “dissipated” marital assets, the evidence must show that one spouse:

  • (1) Used marital property for their own benefit; and
  • (2) For a purpose unrelated to the marriage at a time when the marriage relationship was “irretrievably broken.”

Kothari at 506

Where assets have been expended prior to the marriage becoming irretrievably broken, the issue concerning the possibility of recapturing those expended assets was explicitly left open in Kothari to be addressed at a later point in time. Id. at 507.  However, where a marriage has crossed this threshold and is “irretrievably broken,” all marital assets dissipated by one spouse are eligible for distribution to the other spouse as if they had not been dissipated in the first place.  [Curley].

A marriage is “irretrievably broken” when the marriage relationship undergoes an irreconcilable breakdown, or after such a time when the parties are considering a separation. Siegel v. Siegel, 241 N.J. Super. 12 (Ch. Div. 1990); Kothari, at 506.

The difficulty in determining what can be recaptured as “dissipated” marital assets, is showing that the expended assets were dissipated in fraud of the other spouse’s marital rights. Until such time that both parties are contemplating divorce, the point when the marriage is irretrievably broken, both parties are generally vested with the authority to spend marital funds for their own enjoyment; such as for movie or dinner expenses. Kothari at 506.

However, when a spouse spends marital funds for their own benefit, after the marriage is “irretrievably broken” and such expenditures obviously diminish the amount of property available for distribution by the divorce court, such expended assets constitutes a fraud on the marital rights of the other spouse and the dissipated funds will be subject to equitable distribution. Id.

A wide variety of factors are considered by the courts in efforts to resolve this issue; of those factors, the four most commonly used factors are the following:

  • (1) The proximity of the expenditure to the parties’ separation;
  • (2) Whether the expenditure was typical of expenditures made by the parties prior to the breakdown of the marriage;
  • (3) Whether the expenditure benefitted the “joint” marital enterprise or was for the benefit of one spouse to the exclusion of the other; and
  • (4) The need for, and amount of, the expenditure.

Id. at 507.

To support a dissipation claim, after weighing all evidence presented against these four factors, the court must be able to conclude in the affirmative that the “assets were expended by [the dissipating] spouse with the intent of diminishing the other spouse’s share of the marital estate.” Id.

If the evidence supports this conclusion, then the dissipated marital assets can be credited to the other spouse and are subject to equitable distribution as if funds were not dissipated at all.