Wednesday, March 26, 2014

Going through a divorce? Think twice before spending "your" money.

This is the messiest time of a relationship: you are separated from your spouse but not officially divorced.  You have unofficially split up some assets.  Maybe you each opened a separate checking account.  Maybe you took some money out of the joint checking account and moved it to your personal checking account.  Maybe you cashed in some retirement funds.  Think twice before you spend a large chunk of money during separation; here's why:

The technical term is "dissipation of marital assets" and what it means is that you have spent marital money (i.e. money that belonged to you and your spouse jointly) on personal items (i.e. a weekend girls' trip to the beach, a new wardrobe for yourself, etc.).  The result of this is that you may owe some money back to your spouse at the end of the divorce for what you spent.  Here's an example:

You and your spouse has $25,000 in your joint checking account at the time of separation.  During the separation $10,000 is used to maintain marital assets and the family.  Also during the separation, you take $10,000 and spend it on a vacation for you and your friends.  Due to those expenses, at the time of your final divorce hearing there is $5,000 left in your joint checking account.  $10,000 of that was spent permissibly on maintaining marital assets and the family.  Because the court will consider your $10,000 spent on a vacation as dissipation of marital assets, that amount will not be deducted from the $25,000 you started with at the time of separation.  That leaves you with marital property of $15,000.  To recap: there is actually $5,000 in your joint checking account but there is $15,000 worth of marital property from that joint checking account.  Let's say the court determines marital property is split 50/50.  You get $7,5000 and your spouse gets $7,500.  Because there is only $5,000 in that joint checking account and you already spent $10,000 of that joint checking account money on yourself, you will be required to repay $2,500 to your spouse. 

Now, this does not mean you cannot use money to pay the mortgage and the bills and for groceries.  Marital funds can permissibly be spent to maintain the family and marital assets (i.e. the marital home, cars, etc.). 

As you can see, even with a simple example and even numbers, this area of law can get quite complicated.  If you are separated or contemplating separation, take a quick read on why you should consult with a lawyer first here and what you can expect from an initial consultation with an attorney here.  If you would like more information or a consultation, please contact us at (804) 447-0146 or clbaudean@baudeanlaw.com.