Understanding Marital Waste During Divorce

It can be tempting to disengage from your spouse when you’re going through a divorce, especially a contentious one. However, your spouse’s activities remain important. Why? Marital waste. What is marital waste? It’s blowing money that still belongs to both of you.

Any funds or assets misused by your estranged spouse can be reclaimed through the divorce process. But I’d rather you be able to prevent the loss from happening.

Squandering Assets is ‘Economic Fault’

Colorado is a no-fault state when it comes to divorce and dividing marital property. This means courts are not interested in which spouse was more at fault for the marriage’s failure. Did the husband cheat? Did the wife join a cult? It doesn’t matter why you’re getting divorced. The court will do its best to divide marital assets and debts equitably and send each spouse on their way.

But economic fault? That matters.

Economic fault is when one spouse wastes marital funds or runs up joint debt in anticipation of divorce. This does not mean every dime spent by you or your spouse must be carefully scrutinized and audited. You and your estranged spouse are allowed to spend money on normal and reasonable needs and purchases.

To qualify as economic fault, the spending must be:

• wasteful
• excessive
• unapproved by the other spouse
• in anticipation of divorce

This kind of financial misuse can take many different forms. Let’s take a look at some common scenarios.

Examples of Marital Waste 

• Baby, It’s You: A cheating spouse goes “all in” on their new paramour, spending lavishly on expensive gifts, trips, and meals.
• Eat, Pray, Spend: One spouse “celebrates” the split by going on a traveling-and-spending binge.
• Spite Shopping: He splurges on a classic motorcycle; she invests in a pricey single-and-ready-to-mingle summer wardrobe. Or vice versa.
• The “Going-Out-of-Marriage” Sale: One spouse sells prized possessions at bargain-basement prices to friends and family, hoping to repurchase them after the divorce.
• Give ‘Til it Hurts: That freeloading friend or relative who always needed “a little help” suddenly gets a lot of help.

These are a few examples of how some spouses react to a marital split or pending divorce. However, such frittering away needs not happen under the cloud of divorce to catch the court’s attention.

Secret Spending During the Marriage 

Divorce doesn’t have to be imminent for certain spending to be considered wasting assets. A spouse can squander assets by sneaking around financially behind the other’s back during the marriage.

For example:

• Using funds to discreetly rent escorts or entertain extramarital partners
• Taking out secret loans and credit cards
• Losing/quitting their job and not telling their spouse
• Financing a secret addiction to drugs, alcohol, gambling, or pornography

Any extravagant spending your spouse does without your knowledge is likely done without your consent. The issue, however, is whether the spending was done specifically to deprive you of your rightful share of marital property after divorce and served no benefit to the marriage or the responsibilities of the marriage.

Discretion of the Courts

After filing for separation or divorce, reckless spending by either spouse may be considered wasting. Many courts will also examine questionable spending during the months leading up to the separation. For example: A cheating husband financed his extramarital affair(s) for a year before getting caught.

Not all squandering qualifies as wasting assets if tolerated during the marriage.

For example: You blame your spouse’s gambling addiction for the marriage’s failure. However, you were aware of it and mostly tolerated the issue during the marriage.

Watch Your Own Expenses

If you can accuse, you can be accused. Any expenses you incur can be reviewed by your spouse’s attorney during the divorce. Your own questionable spending — via credit cards, bank accounts, rewards, or cash withdrawals — could be used against you in an economic fault claim.

Do You Suspect Your Spouse of Squandering Assets?

If you believe your marriage is headed for divorce, start looking into your spouse’s spending habits. If you’ve caught them keeping one awful secret, tugging on the thread could reveal more. The same applies if the marriage has felt unstable for a considerable amount of time.

If you discover secret loans or credit cards or find that any bank accounts or trust funds are depleted, you’re probably onto something. If your spouse resists your reasonable inquiries into the marital finances, again, you could be onto something.

Revealing the Potential Wasting of Assets

Step One: Contact a divorce attorney — preferably one with considerable experience at examining complex financial documents. Robinson & Henry is well-staffed with such experts.

You need a lawyer if marital funds or property are missing or have been misused without your consent. If you’re suspicious, but cannot confirm your spouse has been squandering assets, you still need a lawyer.

Step Two: Your attorney can use the power of the court to shine a light on your spouse’s secret spending. Methods available include:

• Motions for documents and financial releases
• Interrogatories, or written questions which must be answered under oath
• Depositions, or verbal questions asked and answered under oath

Step Three: Once a pattern of secret, unapproved spending has been revealed, it must show that:

• The expenditures were made during the breakdown of the marriage, or
• For a non-marital purpose in anticipation of divorce

Step Four:  Now, the burden shifts to your estranged spouse. They must prove that this unexplained spending was for legitimate purposes. They may be required to produce receipts or other documents to back up their claims.

Consequences and Correction 

If the court determines that your spouse has been depleting marital assets, it will adjust the property division accordingly. How? By adding up the value of the squandered assets, and subtracting that amount from the offending party.

For example: Your spouse wasted $80,000 in marital assets over a number of lavish, unapproved expenditures. Now the total value of all marital property and assets is $320,000 — not the $400,000 it should have been. Before commencing ‘equitable division,’ the court awards you $80,000 to offset the amount squandered by your spouse.

Next, the remaining $240,000 is split equitably. Let’s say you and your spouse each receive $120,000. However, with the $80,000 offset, you walk out with a total of $200,000.

You Can Stop Marital Waste Before it Starts

Colorado also has an Automatic Temporary Injunction (ATI) to prevent the misuse or concealment of marital assets during a divorce.

If you think your estranged spouse will attempt to transfer, hide, or squander assets, promptly notify your divorce attorney. They can request court intervention to impose an ATI that restricts both parties from:

• concealing,
• transferring,
• disposing of, or
• squandering marital property and funds

… without consent or court approval. Exceptions can be made if such transactions and expenditures are normal business operations.

The ATI allows attorneys to gather financial information and monitor potential asset depletion by the opposing party.

Get Your Rightful Share of Divided Marital Property

Asset division is often one of the more contentious matters in a divorce. Our experienced and caring divorce attorneys know this and will guide you through the financial disclosure process. A lawyer can make sure your spouse does not squander assets before the divorce. Contact us at 303-688-0944 for a case assessment.