What Is a “Dissipation” of Marital Assets?

Florida follows the principle of “equitable distribution” in divorce cases. In other words, unless the parties agree among themselves how to allocate any assets or liabilities post-divorce, a judge will order an “equitable division.” Equitable does not necessarily mean “equal,” however, and the court may look at a number of factors when deciding the fairest division of assets.

Florida Appeals Court: Cashing Out 401(k) to Pay Off Marital Debts Is Not Dissipation

One factor is the “intentional dissipation, waste, depletion, or destruction of marital assets.” This refers to a situation where one spouse, without the other’s consent, uses marital funds or property for their own benefit and for a purpose “unrelated to the marriage.” Under Florida law, dissipation must occur after the filing of a divorce petition or within the two-year period prior to the filing.

An oft-cited hypothetical example of dissipation is where one spouse is cheating and uses money from a marital bank account to buy gifts for their lover. But it’s important to note that not every act where one spouse withdraws money from a marital account–or even sells a marital asset–qualifies as dissipation.

A recent decision from the Florida Fourth District Court of Appeals, Welton v. Welton, offers a helpful illustration. In this case, a husband filed for divorce from his wife. While the divorce case was pending, the husband unilaterally withdrew $130,000 from a 401(k) account and moved it into an IRA. The husband then withdrew $65,000 from the IRA, which incurred an early withdrawal and other tax penalties.

The husband used the $65,000 to pay off a number of debts. Some of the debts were his alone. The other debts were jointly owed by the husband and his wife. But the husband did not use any of the money to pay off debts that were solely in his wife’s name. As a result, the husband was left debt-free, while his wife still owed $88,000 in debt that was hers alone.

The wife maintained this constituted dissipation of marital assets. The trial court agreed. It held the husband’s actions qualified as dissipation and took that into account when making the final division of marital property.

But the Fourth District reversed the trial court on this issue. The appeals court explained the law required the trial judge to “make particularized findings as to the husband’s ‘intentional misconduct’” to support a dissipation argument. The trial judge failed to do so. To the contrary, the evidence showed the husband cashed out his 401(k) in order to “pay off legitimate marital debts” and “[a]ssets depleted in such a manner cannot be included in an equitable distribution scheme.”

Speak with a Florida Divorce Attorney Today

During a divorce proceeding, it is critical for both sides to avoid taking actions that might dissipate marital assets. A qualified Boca Raton divorce attorney can advise you on this and many other family law subjects. Contact WiseLieberman, PLLC, at 561-488-7788 to schedule a consultation with a member of our legal team today.

Source:

scholar.google.com/scholar_case?case=8169501872933262363

https://www.wiselieberman.com/how-will-gifts-to-or-from-family-members-affect-my-divorce/