Virginia Law on the Dissipation of Marital Assets in Divorce
The property acquired or accumulated by a married couple during a marriage, especially a long one, can include substantial assets. Real property, retirement accounts, or even a shared business may be classified as marital property, in which “both parties shall be deemed to have rights and interests,” according to the Code of Virginia § 20-107.3(B).
This means that in Virginia, pursuant to equitable distribution and state law, a court can ultimately decide upon how marital property is divided or distributed. Marital property includes all assets acquired during the marriage prior to separation. Separate property usually includes property acquired before the marriage or after the date of separation and can include gifts and inheritances made to only one spouse. Once classified as such, separate property is ordinarily not subject to distribution by the Court in a divorce.
My Spouse is Taking Marital Assets or Running Up Credit Cards
Dissipation of Marital Property Defined:
In anticipation of divorce, one spouse may decide to intentionally liquidate, transfer, or otherwise “dissipate” marital assets before the Court can have a chance to rule on their distribution. This is referred to as the dissipation of marital property and occurs when:
“one spouse uses marital property for his own benefit and for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown.” [See: Smith v. Smith, No. 0131-96-2 (Va. App. 1995)]
Dissipation can take the form of withdrawals from retirement funds or other mutual savings accounts, or the creation of debt, such as home equity loans on real property or credit card obligations.
Notably, the party accused of dissipating assets will not be found to have done so if they can show the funds were used for a “proper purpose”, such as paying the mortgage on the family home or providing for children post-separation.
“[T]he use of funds for living expenses while the parties are separated does not constitute dissipation”. [See: Clements v. Clements, 10 (Va. App., 580-587, 1990)].
Legal Remedies For Dissipation
1. Credit for Loss in Final Distribution
If the Court finds that one of the parties has indeed dissipated assets, the Court can credit the other party accordingly. The following constitutes a factor that the Court must consider in distributing marital property:
“the use or expenditure of marital property by either of the parties for a nonmarital separate purpose or the dissipation of such funds, when such was done in anticipation of divorce or separation or after the last separation of the parties.” (See: Code of Virginia § 20-107.3 (E) 10).
The Court may consider dissipated assets while dividing remaining marital property, or simply order the dissipating spouse to pay the money back.
For example, in Pence v. Pence (2016, Va. App., LEXIS 275), when the lower Court found the wife’s removal of $45,000 from a shared family business account to be dissipation, she was ordered to pay back half that amount. Similarly, in Hvozdovic v. McGuire (2018, Va. App., LEXIS 51), both parties were found to have dissipated unequal amounts, and the wife was credited in the division of other property.
2. Alternate Valuation Date
For the purposes of equitable distribution, the Court establishes the value of any given marital asset at the date of the evidentiary hearing, or the trial date. [See: Code of Virginia § 20-107.3(A)]. If the Court discovers dissipation of assets, however, it can use a retroactive valuation date to establish what the value was before the dissipation. The Court would then divide that pre-dissipation value accordingly.
For example, a husband and wife own a house worth $100,000 with no mortgage, which the Court will divide between them evenly. One month before the hearing, the wife unilaterally takes out a $20,000 Home Equity Loan on the property and deposits it into her separate bank account, reducing the equity or “value” of the home to $80,000 on the trial date.
If the Court were to divide the property according to the general rule, both parties would be found to have a $40,000 interest in the property. However, if the Court used an alternate valuation date that pre-dates the wife’s loan, the Court could award the husband a $50,000 interest, based on the value of the house before the dissipation occurred.
Dissipation of assets is not the only “good cause” for the Court to consider an alternate valuation date for a given asset in an equitable distribution case. Under certain circumstances, the Court can select a valuation date in the future. Any party wishing to obtain an alternate valuation date, however, must petition the court for such relief at least 21 days before the actual hearing, per § 20-107.3(A).
3. Contempt Remedies
If one of the parties retains an experienced northern Virginia family law attorney, they can attempt to take action before the assets have a chance to be dissipated.
Seasoned family law attorneys, like ours at Keithley Law, PLLC Law, will identify assets that can be easily dissipated and move the Court to specifically or generally proscribe the other party from dissipating the assets by asking for a non-dissipation clause in a court order. If the other party dissipates nonetheless, contempt remedies are available, including sanctions or even jail time for the noncompliant spouse. [See: Estate of Hackler v. Hackler, 44 Va. App. 51 (Va. Ct. App. 2004)]
Pursue Legal Action with Keithley Law, PLLC Law
When significant property is acquired during a marriage, divorce will likely have heavy financial implications for both parties. The financial component of divorce is among the most important reasons why an experienced family law attorney ought to be consulted with or retained well in anticipation of litigation.
If assets have been untraceably dissipated, one party can be left cheated out of a lifetime of savings. The experienced family law attorneys at Keithley Law, PLLC Law, PLLC understand this process and know what to look out for.
Contact the attorneys at Keithley Law, PLLC Law, PLLC onlineor at (703) 454-5147 today for an initial consultation.