What is Dissipation of Assets in a California Divorce?

Some married couples are able to have collaborative divorces. While a collaborative divorce does not necessarily mean a couple agreed on every aspect of the divorce initially, it does suggest that the couple was able to handle things amicably. In amicable divorces, couples recognize that it’s best to end their marriage, and they both work toward a fair resolution that both spouses can be satisfied with.

Other couples are not as fortunate. For some unraveling marriages, one or both spouses experience anger, jealousy, or revenge and they let their emotions get the best of them. Sometimes, one spouse is the instigator, and the other is simply reacting. Other times, both spouses are equally at war and they end up battling over every dollar.

Squandering Marital Property

As a divorce firm, we have worked extensively with both types of couples; couples who split amicably and couples who end up in divorce litigation. We’ve seen breadwinners or “in spouses” (spouses who control all the money) resort to every trick in the book to try and deceive their spouses out of their fair share. One of the most common tricks we see is when a spouse intentionally squanders marital assets.

When a spouse intentionally squanders or wastes marital assets, it’s called dissipation of marital assets. When a husband or wife wastes marital property, it means they are trying to prevent their spouse from getting what they are entitled to under California’s community property laws. California is one of a handful of states that uses the “community property” method of distribution.

Under this model, each spouse is entitled to half of the marital estate, which includes all the assets and income acquired during the marriage with limited exceptions, such as a gift or inheritance to one spouse alone. So, when a vindictive spouse anticipates a divorce, he or she may intentionally go out and blow the couple’s money assuming they’ll just earn more after the divorce.

How Do Spouses Waste Marital Assets?

There are many ways a spouse can waste marital assets. A cheating husband can pay for his girlfriend’s $5,000 a month luxury apartment or take her on lavish vacations. A vengeful wife can sell her husband’s $75,000 classic car for $1,000 on Craigslist. A husband can head to Las Vegas and blow $20,000 on gambling and strip clubs over a weekend, or a wife can get a “Mommy Makeover” (liposuction, breast augmentation, and a tummy tuck) without her husband’s permission days before filing for divorce. The possibilities are endless.

If a spouse is wealthy, he or she may have no problem at all throwing money away, especially if it means spending money on a boyfriend or girlfriend or on something for themselves that they don’t need. As the saying goes, “Easy come, easy go” and the most vindictive spouses would rather give the money away or lose it than see it be split between them and their spouses.

The consequences for innocent spouses can be dire, especially if the other spouse is unemployed or under-employed. For instance, if a husband insisted his wife quit her job to take care of the couple’s children, she may not have any income of her own. If she doesn’t have a college degree or if she’s been out of the workforce for a long time, she’s probably not going to earn much in the beginning. So, what is a minor bump in the road for a high-earning husband or wife can be an abrupt and even stressful change of circumstances for a stay-at-home mom or dad.

Automatic Temporary Restraining Orders

Some states, including California, protect spouses from dissipation of marital assets through Automatic Temporary Restraining Orders (ATROs). When people hear “restraining order,” they often think of domestic violence restraining orders; however, ATROs are different legal tools that deal with a couple’s finances after a divorce action is filed.

An ATRO is a court order that prevents both spouses from doing anything major, such as emptying a bank account, selling real estate, removing a beneficiary from a retirement account, etc., which would alter the couple’s financial status. They also provide a solid snapshot of the couple’s finances.

“In California ATROs are summarized on the back of the Summons of a Petition for Dissolution. They become immediately effective upon the plaintiff when he or she files the action and upon the defendant upon the service of a summons and remain in effect until the final judgment is signed by the court,” Jeff Landers wrote in Forbes.

“What should I do if I think my spouse is frivolously spending our money to keep my hands off of it?” Our advice is to take a close look at the credit card statements. It’s important to note that a lot of companies use generic-sounding parent companies to obscure the real nature of their businesses.

For example, if a husband was spending thousands of dollars (marital funds) at strip clubs, dispensaries, and “massage parlors” every week, the expenditures can show up on credit card statements as “BMBD Enterprises” or something else that is equally unrecognizable.

If yours is a high-asset divorce, we’d probably recommend securing the services of a forensic accountant, which can be described as a financial detective. He or she can sort through your financial records with a fine-tooth comb and identify any unidentified purchases, or purchases that seem like they were too big for the purpose. From simple tricks to complex schemes, forensic accountants know what to look for.

Next: Does Your Spouse Have an Unfair Advantage?

Do you suspect that your spouse is hiding assets from you? To protect your legal rights under California’s divorce laws, contact our Los Angeles divorce attorneys today!