New York courts divide marital assets in a divorce in a fair way but necessarily a completely equal split. This property method division is called equitable distribution, and its goal is to create a division of marital assets that is fair under the specific circumstances of each case. Because of this, courts can consider a variety of factors when making the property division. One of those factors is what is known as marital waste.
Understanding Marital Waste
The concept of marital waste springs from the New York rules that govern the division of assets. The rules enumerate a variety of factors the court must consider in constructing the division of marital assets. One of those factors is the "wasteful disposition of assets by either spouse." This is also frequently referred to as marital waste. Marital waste occurs when a spouse uses marital assets (note that if they use separate property, there is no issue) for personal benefit or in a reckless way.
Examples of Marital Waste
The classic example of marital waste is money spent on an affair. If a spouse engages in an extramarital affair and spends marital assets on the affair, that is considered waste. A spouse might buy their affair partner gifts, such as jewelry, plastic surgery, or real estate. They might pay for airfare to visit the person or to have the person visit them. Hotel rooms, meals, boat rentals, theater tickets, and other things used for the affair are categorized.
A study done in 2014 found that the average monthly cost of an affair was $444. An affair can be a tremendous expense when you increase that amount to account for inflation and take into account the position of a spouse in a certain income range. Spending marital assets on an affair is the epitome of spending for personal benefit. "Investing" funds in a business run by an affair partner can also be considered waste.
Another example of marital waste occurs when a spouse plans to file for divorce and overspends to an excessive amount in anticipation of the divorce. Hitting Rodeo Drive, Tiffany's, or buying a new Rolls Royce in the weeks before filing a divorce petition is reckless spending for personal benefit. Another example would be withdrawing money from a marital account and using it to buy a home for one's sister, cousin, or best friend, without agreement from the other spouse. Gambling, prostitution, or drug use is a classic example of reckless marital waste.
Purposely destroying marital assets so that your spouse can't receive them in the divorce or benefit from their value is also waste. Examples of this might include burning a valuable painting, destroying a room full of antiques in a rage, or throwing jewelry into the ocean.
Marital waste can be less obvious, though. Selling a marital asset for a price below market value can amount to marital waste if it is intentional or provides some benefit to the accused spouse. Selling a piece of real estate to a person you have having an affair with at a value purposefully less than market value would qualify as marital waste.
What is Not Marital Waste
Using marital assets to pay for living expenses commensurate with the couple's standard of living before the divorce is filed or while the divorce is pending is not considered a wasteful dissipation of assets, unless the accused spouse is aware the couple's financial situation has significantly changed (such as due to a job loss, economic downturn, or other momentous change of circumstances). Continuing to live as you did during the marriage is not reckless or selfish. If a spouse regularly attended fall fashion week in Paris throughout the marriage, making large purchases, doing so while the divorce is pending would not qualify as wasteful dissipation of assets.
It's important to note that hiding an asset is not the same as wasting it. Any hidden asset will be accounted for and included in the distribution of marital assets. Still, it won't be treated as an asset that was wasted, used up, or given away because once it has been identified, it can be accounted for.
Determination of Marital Waste
When determining if marital waste has occurred, the court will consider all of the evidence presented by the innocent spouse and all the defenses presented by the accused spouse. New York courts have considered all of the following factors when determining marital waste:
- Whether the accused spouse intended to use the funds for a purpose outside of the marriage
- Whether the accused spouse used the asset solely for themselves (purchasing a yacht both spouses use would not qualify)
- Whether the accused spouse attempted to hide the withdrawal or spending of the funds
- Whether the purchases made by the accused spouse were frivolous
- Whether the accused spouse began to spend the money after they learned or decided they were getting a divorce
- Whether the accused spouse profited from the spending of the funds
- Whether the accused spouse became intentionally unemployed during the marriage
- Whether the accused spouse was using their own separate funds or marital funds
- Whether the innocent spouse consented to or agreed with the spending
- When the money was spent (spending close in time to the divorce is suspect)
- How the spending affected the family (such as if it caused financial hardship for the family)
Determining if Marital Assets Have Been Wasted
Many spouses are very clever and secretive in their wasting of marital assets. It's unlikely that the innocent spouse will stumble upon a $2 million receipt that is obviously marital waste. If marital waste is suspected, your attorney will hire a private investigator and a forensic accountant.
The investigator will carefully examine all of the accused spouse's actions and behaviors during the marriage and uncover situations of marital waste. A forensic accountant will carefully audit all of the couple's financial holdings for evidence of waste.
An accusation of marital waste on its own is not enough in court. The innocent spouse must be able to provide clear evidence that traces assets and funds and creates a conclusion of marital waste. Detailed financial analysis is what will sway a judge.
What a Finding of Marital Waste Means
When a judge determines there has been marital waste, this impacts the property division. Generally, the way this works is that the court will present the breakdown of assets in accordance with equitable distribution. Then the court will identify the total amount of assets wasted by the accused spouse. That amount is then deducted from the accused spouse's share and added to the innocent spouse's portion. The reasoning is that the accused spouse has already used up or benefited from the amount of wasted assets. Therefore, the innocent spouse is entitled to that same amount for their use after the divorce.
Marital waste can be a significant issue in divorce and requires a detailed examination of marital accounts to trace the wasteful behavior and seek justice for the innocent spouse.