What is Marital Waste and How Does it Affect Property Distribution in a Divorce?

Dividing property in a divorce is a complex and often contentious issue for the divorcing parties. In Maryland, property distribution is governed by the principle of equitable distribution. Equitable distribution does not mean that the division of property will be 50/50. Instead, it means that the court will review a number of factors to facilitate a property split that is fair to both parties.

Factors that Maryland courts consider include:

• The circumstances leading to the spouses’ divorce
• The duration of the spouses’ marriage
• Each spouse’s financial and non-financial contributions to their family’s well-being
• The total value of each spouse’s separate and marital property interests
• The spouses’ respective anticipated economic circumstances post-divorce
• Each spouse’s effort expended in accumulating marital property
• Each spouse’s age, physical condition, and mental condition
• Whether either spouse will receive alimony after the divorce
• Whether one spouse will continue to live in the family residence with primary custody of the spouses’ children post-divorce.

The equitable distribution principle is different than the principle of community property, wherein property acquired after marriage is to be split 50/50 in a divorce. 

The Concept of Marital Waste

Some spouses may feel that equitable distribution is, in fact, inequitable due to the irresponsible spending habits or financial mismanagement of their soon-to-be ex-spouse. Marital waste, also known as dissipation of assets, refers to the intentional misuse, depletion, or squandering of marital property by one spouse without the other’s consent. In many cases, the intent is to reduce the other spouse’s share in a divorce settlement. It typically involves spending marital funds on things unrelated to the marriage’s benefit or the couple’s established lifestyle.

The details will vary by jurisdiction, but most states have a statute or case law to allow such a claim so that it can be taken into consideration when the court determines property allocations. In Maryland, the accusing spouse may allege dissipation of assets or marital waste, but must prove one of the following:

• Family funds were spent on non-family items. Note that it is not considered dissipation when one spouse uses assets to maintain the lifestyle he or she established during the marriage.
• The funds were spent to reduce the amount available for equitable distribution. The court will look at a variety of factors, including the timing of the expenditures, the pattern of similar expenditures, concealment, and the amount of expenditures.

The accused spouse must prove that he or she made the expenditures for an appropriate purpose or for one of the following reasons:

• The property was not subject to equitable distribution due to, for example, inheritance or a prenuptial agreement.
• The expenditures did not affect the money available for equitable distribution.
• The expenditures were for a proper and suitable family purpose.
• The other spouse had either consented to the expenditures or knew of them but did not object.
• The expenditures were a matter of bad luck or bad judgment.

The court or mediator will look closely at what may, on its face, appear to be dissipation of assets but ultimately turns out to be something else. Here are a couple of examples: 

• Transferring one asset to another kind of asset of equal value
• Paying marital debt or jointly titled debt
• Investing in a careful and managed way in market speculation. 

The judge will look at the totality of the facts and circumstances to make a decision about whether a party engaged in marital waste. 

There is no cookie-cutter example of what constitutes marital waste in Maryland. Lawyers sometimes glibly say that it involves the “three A’s:” adultery, alcohol, and addiction. Spending a large amount of money on a girlfriend before getting a divorce – buying expensive jewelry and taking exotic trips – is problematic.  So is spending excessive amounts of money on drugs, gambling, or adultery. But these are not the only activities that will likely generate a hard look by the judge or mediator. Be aware that you will not likely succeed in your claim unless the waste is a substantial sum of money.

Steps to Take to Determine Marital Waste

If you think that your spouse has engaged in marital waste, these are five steps that you can take to make an initial determination:

• Identify the Expenditure – Identify the specific financial transaction that you want to evaluate. 
• Identify the Purpose – Try to figure out if the expenditure was made for the purpose of the marriage or family, or for the benefit of your spouse.
• Evaluate the Timing – Confirm that the expenditure occurred during the marriage.
• Consider the Amount – Evaluate if the amount is significant and large enough to be considered marital waste.
• Document the Evidence – Locate financial documents such as credit card receipts and obtain witness accounts if possible. 

Of course, these are just preliminary steps, and you will need to consult with your Bethesda divorce attorney to ensure you have adequate proof to bring the expenditures before the court. 

How is a Settlement Affected By a Finding of Marital Waste?

Typically, the wasted amount gets subtracted from the offending party’s distribution amount. Let’s say that the court has found that Jennifer wasted marital assets in the amount of $60,000. And let’s also say that Joe and Jennifer’s investment account is $200,000, and the court decided an equitable distribution would be a 50/50 split, with Joe and Jennifer each getting $100,000. In this situation, Joe would get an additional $60,000 for a total of $160,000, and Jennifer’s $100,000 would be reduced by $60,000, so she would receive a total of $40,000.

Contact The Law Offices of Brandon Bernstein Today

Here at The Law Offices of Brandon Bernstein, LLC, we have extensive experience helping our clients resolve the financial issues related to their divorces, including property distribution and concerns about marital waste that affect property distribution. We advocate for you with integrity and personal commitment to your desired outcome. Contact us today for a free consultation.