What does asset dissipation mean? There are many couples that divorce amicably. They see that it is better for them, however they got there, to separate as a married couple and move on as individuals. They work hard together to come to a fair and equitable agreement on asset division and the ultimate settlement of their property. But there are many couples who find divorce incredibly complicated. Sometimes in these cases, there will be a partner who ‘disappears’ assets through the squandering of their wealth just to deplete what could be shared. This is called asset dissipation.
Asset Dissipation – What Is It and How Is It Done?
In most contexts, asset dissipation refers to intentionally using up or wasting assets. In this case we’re specifically referring to the dissipation of matrimonial assets. Some primary motivators for the dissipation of assets by one ex-partner is to get back at the other party or to get even. They may be angry, spiteful, uncaring and greedy and they aim to make their ex ‘pay’. There are many angry husbands or wives who will do whatever they can to prevent their ex from getting a fair share in the divorce property settlement. ‘Dissipating’ or wasting marital assets is one way they might do this.
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There are a couple of key ways in which asset dissipation might occur:
- If one party sets out to behave in such a way so as to purposefully reduce the value of matrimonial assets (assets acquired by one or both spouses during a marriage). They might deliberately destroy a matrimonial asset (such as a car or house) or embark on the wasteful squandering of assets. Or a cheating spouse has spent $100,000 on a holiday for their girlfriend or boyfriend which effectively reduces the marital asset pool.
- One party may set out to be negligent or reckless with matrimonial assets which reduces the value of the shared assets. This might be through excessive gambling or through wanton and excessive drug or alcohol abuse.
Other ways in which an ex-spouse might try to waste assets include:
Purchase items that could easily be overlooked or undervalued. Maybe no one will notice that expensive antique that’s now at his office? Or perhaps there’s expensive new furniture, artwork, or car.
Stash money in a safe deposit box, somewhere in the house or elsewhere. The ex-spouse may be trying to hide assets by withdrawing cash on ‘expenses’ but in reality is keeping the money for themselves to reduce the marital asset pool.
Defer salary, delay signing new contracts and/or hold commissions or bonuses. The ex-spouse may ask his or her boss or a new client to defer payment until the divorce is finalised, so that this payment isn’t part of the asset pool.
Create phony debt. An ex-spouse can collude with family members and/or friends to establish phony loans or expenses. Then, he/she can make payments to the family members or friends, knowing that they’ll get all the money back after the divorce is final.
Good Legal Advice is Essential
Because dissipation of assets can be tricky to prove, make sure you have good professional advice from a family lawyer and even a forensic accountant. They will be able to help you decide the best course of action. For there to be a convincing claim, the amount or assets in question needs to be substantial and if it’s wasteful spending on the part of your ex-husband or ex-wife that you’re worried about, then it needs to be behaviour that you weren’t turning a blind eye to before your separation.
It is really important to seek legal advice as soon as you start contemplating a divorce. This means that you have a greater chance of preserving your matrimonial assets before they are formally separated with a divorce property settlement. Getting advice and the support of professionals sooner rather than later means that there is less chance for the dissipation of assets by your ex. Allowing a long time to pass between separation and beginning property settlement negotiations is sometimes unavoidable, but there is greater risk in these situations for asset dissipation – even if done in the everyday expenses of life, rather than outright manipulation.
How to Prevent Asset Dissipation?
If one party believes that the dissipation of assets is highly likely by the other party, it may be advisable to seek an injunction – a court order by which an individual is required to perform, or is restrained from performing, a particular act. Freezing orders (also known as Mareva injunctions or asset preservation orders) can be granted by the Court to prevent the dissipation of assets.
What Recourse Do I Have?
Previously, the practice was for courts to ‘add-back’ to the property pool any assets that were dissipated after separation. This is referred to as ‘add-backs’. More recently though in a 2012 High Court case, Stanford v Stanford, the High Court cast uncertainty as to whether ‘add-backs’ were justified. If asset dissipation is proven then the Court may make a percentage adjustment for the final property settlement in favour of the innocent party, rather than a notional adjustment as has been done previously.
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At Divorce Lawyers Brisbane we recommend that negotiations for a property settlement commence shortly after a separation and, ideally, prior to the parties’ acquiring further assets or incurring further debt. We are experienced in handling property settlements for our clients, and focus on mediation and negotiation where possible to get the most cost-effective and satisfactory results. We are also skilled at handling court proceedings to finalise property settlements if this ultimately becomes necessary.
To speak to one of our experienced family lawyers please contact us today. We offer a free, 10-minute phone consultation.