What Even Is Marital Waste?
Marital waste occurs when one spouse intentionally misuses marital property. Another term for it is wasteful dissipation of a marital asset.
How can marital property be misused? It can occur in a few ways: (1) when a spouse uses marital property in anticipation of divorce, (2) when a spouse uses marital property in connection with a fraud, or (3) when a spouse uses marital property without the knowledge or consent of the other spouse.
Taking a step back, it’s helpful to understand that the overarching theme when analyzing the issue is that a marriage, while in tact, is seen as an economic partnership. Spouses are expected to share in the partnership’s profits and its losses. Respect for the parties’ judgment as to how funds are spent during marriage is the well-established precedent in New York. If none of the three factors above are met, the courts are hesitant to second-guess the economic decisions made by either party during a marriage, even when the net effect of those decisions results in the reduction of marital assets.
When marital waste is in play, the innocent spouse is generally entitled to a credit back to the marital estate for the amount misused. Here are some examples of marital waste:
In Anticipation of Divorce
Using marital assets to maintain your standard of living prior to the divorce is generally not considered marital waste. For example, if you lost your job during the pandemic and had to liquidate an asset to defray the carrying costs of your home while unemployed, you would have a reasonable defense against a claim for marital waste. However, if in anticipation of divorce, you voluntarily left your job and liquidated a marital asset while remaining unemployed, you would find yourself in a very different situation.
Reneging on financial responsibilities can also constitute wasteful dissipation, i.e. allowing encumbered property to be repossessed or go into foreclosure.
Vices
Spending marital assets on activities such as excessive gambling, extramarital affairs and illicit substances are generally considered marital waste. Records can be subpoenaed and transactions are traceable, even when the charges on financial statements are supposed to be “hidden.” Also, having an addiction does not necessarily negate the court’s ability to find that financial misconduct occurred and must be accounted for.
Proving marital waste is a tough endeavor. The bar is high, and in some cases, once the assets are gone it can be difficult to recoup the entire amount lost. Assets must be valued and experts must get involved to ensure that the after-tax value of all of the remaining property is equitably divided to account for the wasteful spending.
At Artese Zandri, we help couples prepare for marriage and navigate divorce. If you or someone you know has questions about family law, reach out to us for a complimentary consultation at consultation@artesezandri.com.