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Pre-Separation Dissipation and the Marital Estate

By Mark Momjian

Contemporary family law practice abounds with allegations of dissipation and misappropriation of marital assets. Over a generation ago, few contested divorce actions involved claims of economic misconduct. As the current recession deepens, these claims are not only on the rise, but they appear to be the rule in many cases. Indeed, the tool box of the modern family lawyer is brimming with instruments designed primarily to prevent a spouse from intentionally, fraudulently or recklessly liquidating, transferring, alienating or encumbering marital assets. In addition to granting injunctions and other forms of special relief, family courts are increasingly joining third parties as additional defendants, issuing attachment proceedings, and in some of the more egregious cases, imposing constructive trusts.

These tools, however, are used to prevent or enjoin dissipation that occurs after the parties have already separated. Today, however, family lawyers are confronting issues involving pre-separation dissipation, even though many divorce statutes contain little or no guidance on whether assets dissipated or misappropriated prior to separation can be “added-back” into the marital estate for distribution purposes. This is not to say that these statutes are silent generally on the issue of dissipation. To the contrary, in dividing the marital estate, many state laws look to the contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the property subject to division. Pre-separation dissipation is a relatively new concept, which argues for the inclusion of the dissipated asset into the martial estate, even though the dissipation took place during the marriage and prior to the date of separation or the commencement of the action. Put another way, if a spouse deliberately or recklessly dissipates marital assets either in contemplation of divorce or during a period when the marriage is in serious jeopardy, can the spouse guilty of economic misconduct be charged with those dissipated assets at the time of equitable distribution or community property division?

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