How to Protect Your Finances in Divorce: The Often-Overlooked Risks of Asset Dissipation

The protocol for enduring a divorce can be extremely overwhelming. Every day is a new journey of being under a microscope in a world of unseeingly unknowns. Embarking on the journey of divorce can often feel like a temporary standstill in life, a pause button pressed while navigating the intricacies with a former partner. In fact, every day can feel like an eternity especially when you must rethink every-day tasks of a simple nature  Amidst the emotional turmoil, the financial aspects of divorce pose a unique set of challenges. Questions arise about sharing finances during the proceedings, discerning permissible expenditures, and even the prospect of obtaining a new credit card in the midst of this life-altering process.

1. The Delicate Art of Spending: Avoiding Dissipation Allegations

Whether the decision to divorce is mutual or one-sided, it demands a careful examination of spending habits during the course of separation and divorce. The specter of being accused of dissipating marital assets looms large—a situation where one depletes marital assets for a purpose unrelated to the marriage during the period when the marriage is undergoing an irretrievable breakdown.

As it relates to marriage and divorce, a dissipation claim against you means that you have been accused of inappropriately spending, wasting, or destroying marital—or non-marital—property, which negatively impacted the upcoming property division negotiation.

No matter who initiated the divorce, you must be very careful about how you spend money when you are separating and divorcing your spouse. The last thing you want is to be accused of dissipating marital assets. Dissipation of marital assets is when one spouse depletes, wastes or uses marital assets for their own benefit or a benefit not related to the marriage while the marriage is going through an irretrievable breakdown.

Imagine a scenario where a spouse attempts to drain a shared savings account strategically, aiming to withhold funds or spend it on a paramour. Additionally, many actions that seem innocent may lead to serious allegations of dissipation. Similarly, if financial resources are diverted to extramarital pursuits or frivolous personal expenses, the risk of dissipation accusations escalates and becomes a zenith for discovery pursuits. How about spending on a paramour or even merely buying gifts for a friend’s birthday? Gambling, vacations, cash advances, cash withdrawals, may all be fodder to scrutiny when you are in the midst of a divorce or leading up to a divorce.

Some classic examples of dissipation include, but are not limited to:

• Gifts or expenditures for a lover.
• Taking a vacation with a paramour.
• Gambling (the debts would likely be “dissipation,” but any winnings may be classified as “marital property” to be divided).
• Carelessly or intentionally causing the family business to fail.
• Failing or intentionally refusing to pay the mortgage so a home ends up in foreclosure or causing an expenditure of fees and costs due to non-payment.
• Unexplainable Cash withdrawals without proper corresponding documentation.

Even seemingly innocuous actions like using shared assets to pay off individual debts, especially those classified as non-marital, may be perceived as dissipating marital assets. The consequences of dissipation are severe and may involve repaying the assets or receiving a diminished share in the divorce settlement.

In the face of dissipation allegations, seeking legal guidance becomes imperative and extremely beneficial. Attorneys experienced in handling such cases can provide essential counsel to navigate the complexities and avoid the potential for problems in highly inflammatory legal proceedings.

2. Deciphering the Definition of Marital Assets and Dissipation in Illinois

Understanding how Illinois law defines marital assets is pivotal. According to Section 5/503 of the Illinois Marriage and Dissolution of Marriage Act, marital property encompasses all assets, debts, and obligations acquired during the marriage. A critical point to remember is that anything acquired during marriage and during divorce proceedings but before the final judgment may be deemed marital property.

On the flip side, non-marital property includes, but is not limited to, gifts, inheritances, assets acquired before marriage, and those specifically excluded in a valid prenuptial or postnuptial agreement. The nuances in distinguishing between marital and non-marital property emphasize the indispensability of legal counsel during the divorce process.

3. Prudent Financial Management During Divorce

To sidestep dissipation allegations, a judicious approach is to postpone major purchases until after the divorce is finalized. In cases where significant expenditures are unavoidable, such as acquiring a new car because the old one became unmanageable, it becomes crucial to speak to counsel as to alternative approaches to such a purchase. By way of example, a car lease may have the potential to avoid a newly created marital asset with value or send out dissipation shockwaves.

Additionally, vacations and other frivolous expenditures may be fair play during divorce as they may be determined to be dissipation by a court. Therefore, even though you really want to take your significant other to Barbados, it may be wise to discuss with your counsel before embarking on this potentially problematic expenditure. Likewise, an expenditure for expensive birthday gifts for your best friend(s) may be deemed challenging as well. After all, the expenditure for a purpose unrelated to the marriage during a time of an irretrievable breakdown of the marriage.

The overarching principle during divorce proceedings is to adopt a conservative and thoughtful spending approach. Allocating funds for family-centric expenses, like mortgage payments or shared children’s needs, potentially stand on firmer ground if allegations of dissipation are presented.

4. Unraveling the Web of Suspected Dissipation by Your Spouse

In the unfortunate event of suspecting a spouse of dissipating marital assets, swift communication with a seasoned divorce attorney is paramount. Concurrently, gathering comprehensive financial records and evidence of dissipation becomes a strategic move. A proficient attorney, well-versed in handling dissipation cases, not only offers guidance but can also assist in filing claims with the courts on your behalf to procure a fair resolution.

When uncertainties loom over a potential purchase, Corri Fetman & Associates, Ltd. can offer valuable insight and strategic representation relating to dissipation, divorce and marital dissolution issues.

5. What to Do If You Suspect Your Spouse of Dissipating Marital Assets

If you are concerned that your spouse has dissipated marital assets, you should consult with an attorney right away. You should also collect all financial records you have access to and any proof of dissipation. If you are unsure if something is relevant, keep a record of it, and consult a competent divorce lawyer. Corri Fetman & Associates, Ltd. is skilled in handling divorce, family law and dissipation cases, and will provide you with the guidance you need and help you navigate the complex process.

To book an appointment, call (312) 341-0900 or use the link below.