One of the most challenging hurdles in every divorce is the division of marital property. In Minnesota, property is divided in divorce according to the principles of equitable distribution. That doesn’t necessarily mean exactly equal, although an equitable division is often pretty close to equal.
Instead, equitable distribution means that marital property is divided in a way that is fair under the circ*mstances.
Think of the marital estate to be divided as a chocolate layer cake. In most cases, a court would choose to divide it roughly in half (if the couple hasn’t already reached their own settlement). But what if, while the cake was waiting for the court to divide it, one spouse cut a hefty slice and shoved it in their mouth? Would it be fair for the court to divide the remaining cake in half and award equal portions to both divorcing spouses? Most people wouldn’t think so (at least, the ones who don’t have a guilty look and a smear of chocolate icing on their faces).
But that’s exactly the problem that arises when one spouse engages in reckless spending during the divorce process. They are reducing the size of the marital “cake,” and then may demand to also get half of what’s left. What is reckless spending in divorce, and how can you protect yourself if your spouse does it?
Dissipation of Marital Assets
Just spending money, even on luxuries, does not necessarily count as reckless spending in divorce (also known as wasteful dissipation of marital assets). Reckless spending can be defined as spending marital funds for the benefit of one spouse for purposes unrelated to the marriage. It often takes place without the other spouse’s knowledge, and always without their consent.
It can be hard to define what counts as “reckless,” and what doesn’t. One spouse buying a designer handbag or expensive gaming system? As isolated purchases, it might be hard to prove these were reckless or intended to reduce the marital estate.
The same transactions might be considered reckless in one scenario, but not in another. If an executive with a high net worth buys herself a $10,000 spring wardrobe, as she does every year, during a divorce, a court might not consider that wasteful dissipation of marital assets. If a store clerk whose family’s household income is under $50,000 per year buys a $10,000 wardrobe the day after their spouse files for divorce, a court would probably view it differently.
Context clues matter. Was the spending a departure from the spouse’s usual habits? Did they spend a lot of money relative to the couple’s income and net worth, or not that much? When did the spending start or escalate? If during the breakdown of the marriage or after the divorce was filed, that suggests an intentional dissipation of assets. What was the spending for? A solo vacation for one spouse (or perhaps a getaway with an affair partner), or new furniture for the marital home?
Whether an outlay of money represents reckless spending in a divorce turns on the facts of the case. Here are some factors that might lead a court to conclude that one spouse’s spending during a divorce was reckless:
- The money was spent on an affair partner, such as vacations or gifts
- The money was gambled away by one spouse
- One spouse spent large amounts of money on drugs
- One spouse made gifts, loans, or alleged loan repayments to friends or family members
- The spending was disproportionate to the family’s income and net worth
- The spending represented a departure from the spouse’s usual spending habits or began shortly after the spouses separated or filed for divorce
- One spouse spent significant amounts of money or made withdrawals from financial accounts without the other spouse’s knowledge or permission
- The spouse who made the expenditures lied to the other spouse about what they were for
- One spouse made an excessive advance payment for legal fees in the divorce, possibly intending to put the other spouse at a disadvantage.
Because context and facts are so critical when determining whether spending in a divorce was reckless, it is important to work with a divorce attorney who knows how to best present the relevant facts to the court.
What Can a Court Do If It Finds Reckless Spending in a Divorce?
Minnesota law explicitly forbids the “transfer, encumbrance, concealment, or disposition” of marital assets in a divorce. If a court finds that one party wasted marital assets in these ways, such as by reckless spending, it will try to put the wronged spouse in the financial position that they would have been in had the other spouse not dissipated the marital assets.
To go back to our chocolate cake example, let’s assume that one spouse gobbled up a quarter of the cake before the court could divide it. Instead of giving each spouse half of the remaining cake (37.5% of the total), it might give the wronged spouse two-thirds of the remaining cake, or 50% of the original cake.
The burden of proving that one spouse wasted marital assets in a Minnesota divorce is on the spouse claiming to have been wronged. That spouse must also show that the spending or transfer in question was without their consent, and was not in the usual course of business or for necessities of life. Again, a lot depends on specific facts. It might be easy to show that whisking an affair partner off to Paris is not a usual or necessary expenditure. One spouse’s purchase of a new car might be more difficult to prove was reckless spending.
To learn more about what constitutes reckless spending in a Minnesota divorce, or to learn about your options if your spouse has dissipated marital assets, contact Mundahl Law at 763-575-7930 to schedule a consultation.
