0203: How to Stop Your Spouse from Wasting Your Marital Money

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.   One important topic that comes up on calls is how do I stop my spouse from spending all our money? Now, this question comes in many flavors. It could be frivolous purchases, vacations, money spent on an affair. I've heard people spending hundreds of thousands of dollars on prostitutes. Sometimes there's just a spouse that's terrible with money, and one spouse likes to go shopping, or might even quit their job and just spend a lot more money than they used to all of a sudden as part of the relationship. I've had cases where spouses are sending money to family members for questionable purposes. I've had cases where spouses take money out and invest it into terrible business ideas. I've had people who spent a million dollars or more investing in some latest fad and losing it all. Could be gambling, could be drugs, could be any number of situations as to when a spouse is wasting money, and the question is, well, what do I do about that? Is there any recourse? How do I handle that type of situation? And, like in all things divorce, of course state laws vary on the subject, but I want to provide a few terms for you to think about, and a few things to be aware of if this is a situation that may be affecting you. I'm going to give you three things to think about. The first is something called dissipation. The second is tracing, and the third is the timing of your divorce. And we're going to go through these things and dig into them a little bit, and maybe these will be helpful for you as you try and figure out, well, what should I do in this situation? Let's start with the first thing, which is dissipation of marital assets. Dissipation of marital assets. I know some of you take notes, and I want to spell out the word dissipation, D-I-S-S-I-P-A-T-I-O-N. Dissipation. I feel like I'm in a spelling bee. And the general idea of dissipation is that one spouse is wasting marital money, and it's not in the normal course of your expenses. For example, if one person wasted $25,000 on an affair with someone. Maybe taking someone on trips or nice meals, or whatever, buying gifts, whatever the case may be, or it could have been any of the examples above. Drugs, gambling, anything. And in dissipation, what happens is you figure out what was lost, and you can get reimbursement for the funds that one spouse spent. So if your spouse wastes a bunch of money on an affair, you can basically get that money back as part of the split of the divorce process. Now, there's a lot of complications and intricacies related to that, but it's something that you should bring up with your attorney and look up the laws in your state to figure out if it is something that may apply to you. But that's the term that you might be looking for, and people don't always know the terms, so I want to make sure that you know what that is. The second thing is something called tracing, and tracing is a word that's used, it's a legal term, but the concept is very simple. And tracing is used in many aspects of the divorce process, when it comes to splitting up all of your assets and debts and such. And the idea is to figure out, well is to trace, to figure out, where money came from and where it went, oftentimes. And so tracing comes to prove the flow of funds from one place to another. I was watching an episode of Law and Order, it was on TV, and it was an older episode, and the judge, they had a family law judge on in Law and Order. And one of the characters, this is SVU, Elliot Stabler is in the middle of a divorce, and the family law judge says, "It's my job to figure out who I think is lying less." I wrote that down, as I thought that was a great quote, because it's very relevant when it comes to tracing. The goal of tracing is to figure out, well, one person's going to say the money came from one place, another person's going to say the money came from another place, and the real question is, who's right? And where did that money actually come from? Much of divorce is he said, she said, and there's three sides to every story, where there's what one person says, what the other person says, and then the truth. And in order to prove wasting funds is that you need to have the evidence of the wasted funds, or be able to trace those issues and assets. And so it could be something like getting credit cards. It could be something like bank statements, could be retirement account withdrawals. But you have to figure out where the money went, and oftentimes it's not easy. Sometimes it can be a very tough process to trace or to follow up on every transaction, everything you're looking for, and it can be an expensive process, too. You might need the help of an accountant or a forensic accountant, and you're going to need to get lots of bank statements and account statements and start to try and put together a picture of where certain marital money went. And it's not always obvious that something was, let's just say out of the normal course of business for your family, and it could be a challenge. Sometimes it could be five or 10 or 20 thousand dollars just to figure out where assets went, or more. And so you need to think about that as you are wondering about assets. Sometimes, and I'll work with you, and it's a smoking gun case of like, oh, well every time this person visited Miami, that was where the mistress or affair person was located, and it's easy to, Miami wasn't actually a business trip. It was only a play trip, and it's easy to figure out all the transactions that happened in Miami. But most of the time, nine out of 10 times, it's nowhere near that simple, and it's something that you have to figure out. And one of the questions is, how much money is gone and how much will it cost to try and find that money, and on top of that is, after you spent all the money on trying to find it, will it have been worth the time and energy? So that's tracing. The last thing is not a technical term, but more of something for you to think about as you go through the divorce process, which is the timing of your divorce can be very important and very relevant when it comes to the wasting of marital funds. And what I'm getting at is, normally when you file divorce, it kind of stops any major transactions from happening, financial transactions from happening, between you and your spouse. And so what happens is if you file for divorce, basically you're not supposed to do anything suspicious. You're not supposed to make any big withdrawals, you're not supposed to make any big purchases that are out of the ordinary, you're not supposed to move a bunch of money around different accounts. You're not supposed to do anything that could be considered questionable once the divorce is filed. But up to that point, I hate to say it, that's kind of fair game. You can kind of do whatever you want. I'm not going to say that you can get away with some of the stuff we talked about before, but it's a lot more of a gray area in terms of what's going on in your divorce. And so one of the things that I talk with you sometimes to consider is if your main concern is stopping a spouse from making a major purchase, or making a big withdrawal, or changing assets on something, then filing for divorce could be a great solution in order to prevent something bad from happening, at least from a financial perspective. Now, I don't ever encourage filing for divorce. I say my hope is that no one ever has to listen to this podcast again, and that would be great. But the reality is, is sometimes it's required, and that's why we're all here, and that's why we're listening, and necessary, and so one of the things to think about is if you are fearing, and I hear this every week, that your spouse is going to waste money on something else in a big sum, then that may be the cause or may be the reason you want to consider moving up the timing of a divorce filing. Now, filing for divorce and the timing around it is a very sensitive subject, and there's a lot of moving parts and a lot of things to consider, but if you are putting together your list of reasons you might want to file sooner over later, and that is it, is to prevent a spouse from wasting funds, any more funds than they have already, on certain areas of the divorce. Because that way there would be recourse and very clear recourse for you to get that money back later, if a spouse is wasting funds. Now, those are just three things to consider, and three ways to help stop your spouse from wasting money, and to get that money back, or at least try to get that money back, either during the settlement process or sooner. When you are dealing with the divorce situation, and the divorce process, I should say, if you can trace marital assets that have been dissipated ... Whew, a lot of words. You might be able to get some credit for those, and get more of your share of the assets later down the line, because one spouse wasted them upfront.