Money problems can put enormous pressure on a marriage. But if you're considering divorce because your spouse is spending excessively, there's another question you need to ask: What happens if the spending continues while your marriage is falling apart?
If your spouse is running up credit cards, draining accounts, making unusual purchases, or spending marital money for his or her own benefit, don't automatically assume you're stuck with the consequences.
But don't automatically assume the court will reimburse you either. In New Jersey, the details matter.
It can be, but not every questionable purchase qualifies as dissipation.
During a marriage, spouses generally spend marital money. They take vacations, go out to dinner, buy clothes, pursue hobbies, and make financial decisions the other spouse may not particularly like.
A divorce court isn't normally going to go through years of your marriage and decide whether every purchase was wise. The issue becomes more significant when marital assets are being spent for one spouse's benefit, for purposes unrelated to the marriage, at a time when the marriage is in serious trouble.
That's when we may need to look more closely at dissipation of marital assets.
New Jersey courts have considered several factors when determining whether spending constitutes dissipation.
Those can include:
Ultimately, the question isn't simply whether your spouse spent too much money. The court may need to determine whether marital assets were spent in a way intended to diminish the other spouse's share of the marital estate.
That's a much different issue than simply having a spouse who was always a big spender.
Suppose your spouse has always spent $10,000 a year on an expensive hobby. You may hate it. You may think it's financially irresponsible. It may even be one of the reasons your marriage is ending.
But a long-established pattern of spending during the marriage isn't necessarily the same thing as suddenly draining $50,000 from a marital account after the marriage has broken down.
Timing and context matter. A dramatic change in spending as separation or divorce approaches can raise questions that ordinary marital spending may not.
This is when you should pay attention. If you discover large withdrawals, unusual transfers, rapidly increasing credit card balances, significant purchases, or money disappearing from marital accounts, speak with your divorce attorney.
Don't wait until the money is gone and the divorce is almost finished. Depending upon the circumstances, there may be legal steps that can be considered to preserve marital assets while the case is pending.
What should be done, and how quickly, depends upon the particular facts of your case.
If you're concerned about spending, one of the most useful things you can do is understand where your money is actually going.
Gather financial records that you already have lawful access to, including:
Don't rely entirely on your memory. And don't make accusations based solely on the fact that you disagree with your spouse's spending.
The financial records can help your attorney determine whether you're looking at ordinary marital spending, significant marital debt, dissipation, hidden assets, or another financial issue that needs to be addressed.
Dissipation can become relevant when marital property is divided.
New Jersey's equitable distribution law specifically directs courts to consider each spouse's contribution to the acquisition, preservation, appreciation, depreciation, and dissipation of marital property.
So if marital assets were improperly depleted, the court doesn't necessarily have to pretend that the money never existed. How that issue is ultimately addressed depends upon the facts, the amount involved, the evidence, and the rest of the marital estate.
Overspending can create another problem: debt.
If your spouse has accumulated substantial credit card balances, personal loans, or other liabilities, don't assume that every debt in one spouse's name automatically belongs only to that spouse.
At the same time, don't assume every debt accumulated during the marriage will necessarily be divided equally. The purpose of the debt, when it was incurred, what the money was used for, and the circumstances surrounding it can all become important.
This is another reason you want to identify unusual spending as early as possible.
If you discover that your spouse is spending heavily, your first instinct may be to move money, empty an account, or cut off access before your spouse can spend more. Be careful.
You don't want your attempt to "protect" marital money to create another dispute or make it appear that you're the one improperly moving assets.
Talk to your attorney about the problem and determine the appropriate way to protect yourself based upon the circumstances.
If your spouse has always been a spender, that may be a serious problem in your marriage. But from a divorce perspective, I want to know more.
What is being spent? Where is the money going? When did the spending occur? Is it consistent with how you lived during the marriage? Is marital money suddenly disappearing now that divorce is approaching? And is substantial new debt being created?
Those facts can tell us whether you're dealing with ordinary financial disagreements or a problem that may actually affect the division of your marital estate.
If you're preparing for divorce and want to understand the financial decisions you'll be facing, my free Divorce Smarter Course will walk you through property division, financial issues, and the other major decisions involved in a New Jersey divorce.
Until next time,
Steve