Is Your Spouse Guilty of Dissipation of Marital Assets under the New Illinois Divorce Laws?
Of these examples, which one reflects a dissipation of marital assets in your Illinois divorce?
- A spouse who gambles away marital monies during your marriage.
- A spouse who gifts money or assets to another person during your marriage.
- A spouse who hides or transfers assets during your marriage for purpose of avoiding splitting those assets with you in anticipation of your Illinois divorce.
The answer is any or all of these three examples may be a dissipation of marital assets.
What Defines When a Dissipation of Marital Assets Occurs in a Marriage?
Dissipation of marital assets occurs under Illinois law when one spouse uses money or assets for purposes unrelated to the marriage when the marriage has "irretrievably or irreconcilably broken."
A. Marriage undergoing in reconcilable breakdown: For a dissipation of marital assets to occur, the marriage must be undergoing an "irreconcilable breakdown" for money or assets to be dissipated. It is not necessary that the breakdown of the marriage be complete. This makes sense since most marriages don't breakdown at a single moment in time but most commonly over a period of time- months or even years.
B. Use of money or assets for a purpose unrelated to the marriage: The second element is that money or assets must be expended by a spouse for a purpose unrelated to the marriage. Sometimes this is not easy to determine. The most obvious example of dissipation may be that of a spouse who gambles away marital monies during the marriage breakdown. However, if a husband and wife gamble together while the marriage is breaking down, the losses by gambling are most likely not a dissipation.
Gifts of Money or Assets to Another Person
If your spouse gives money or assets to another person, then this may be a dissipation if the marriage is undergoing an irreconcilable breakdown. For example, gifts to your spouse's boyfriend or girlfriend may well be dissipation. However, gifts to your children or parents, if not excessive, are probably not a dissipation.
Spouse Who Hides or Transfers Assets During Your Marriage
A spouse who hides or transfers assets during your marriage for the purpose of avoiding splitting those assets with you in anticipation of your Illinois divorce may indeed be guilty of dissipation.
Hence, it is very important to start the discovery process as early as possible in an Illinois divorce case to obtain the spending records from your spouse or to obtain them by serving subpoenas upon banks, stock companies or others. But in this example, "timing" may be everything.
Under the new changes to the Illinois Divorce Law, effective January 1, 2016 there are restrictions on making a claim for dissipation based upon "timing." Dissipation must have occurred prior to five years and the filing of a Petition for Dissolution of Marriage or three years after a spouse who claims dissipation knew or should have known that dissipation occurred.
Written Notice Must be Given to the Dissipating Spouse Describing the Dissipation Once the Divorce Case is Filed
Additionally, upon filing a divorce case, the spouse claiming dissipation must serve written notice upon the spouse committing dissipation. The written notice must state the date or period of time during which the marriage began undergoing an irretrievable breakdown, an identification of the property dissipated, and a date or period of time when the dissipation occurred.
The January 1, 2016 changes to Illinois divorce law on dissipation now require that the spouse claiming dissipation only file a certificate of service of notice of intent to claim dissipation with the clerk of the Circuit Court where the case is filed, but the law does not require that the full description of the dissipation be set forth in the notice. Also, dissipation after 2015 applies only to marital property and not to non-marital property unlike prior law.
How Difficult is it for Me to Prove That My Spouse Dissipated Marital Assets in My Illinois Divorce?
Once the spending spouse or spender has been served with the written notice of your dissipation claim, the burden of proof shifts to the spender to justify that the assets or monies spent were free from dissipation. In addition, the spending spouse is held to a higher standard of proof to justify the spending.
You spouse must show by "clear and convincing evidence"—proof that the spending was proper. Clear and convincing proof means that degree of proof considering all of the evidence in the case, produces the firm and abiding belief that it is highly probable that the explanation relied upon by the spender is true. For example, a spending spouse's explanation that money was spent on "living expenses" or "support for the family over time" is not enough proof to avoid the claim of dissipation.
What Happens to a Spouse Who Has Been Found Guilty of Dissipation and in Illinois Divorce Case?
If your spouse has found to have dissipated assets in Illinois under the rules as described in this article, then your spouse must reimburse the marital estate for all of the money spent or assets hidden. So, for example, if the court finds that your spouse dissipated $100,000, the money would be treated as though it was still there and you would receive your 50 percent, or perhaps more, from the other assets in the case. Or, alternatively, your spouse could be ordered to pay the money back to you.
So what do we learn from all of this? First, if you know that you are going through divorce and you suspect that your spouse may be dissipating assets, then you need to make your claim early enough so that is not barred by the three year or five year cutoff dates described above. If you think you are going to the wrongfully accused of dissipation, then the key is to keep meticulous records of spending as well as assets.
In most cases where dissipation occurs, the amount of dissipation may be a tremendous bargaining chip. In my experience of more than 35 years of dealing with dissipation in Illinois divorces, the issue of dissipation comes up frequently. What is new is that you have to be careful to meet timing requirements so that you do not let dissipation go by because you think you may reconcile.
Do not forget that even if your spouse gambled away all of your life savings, if it happened more than five years before you filed your divorce, you do not get any credit at all, or reimbursement, because there is no dissipation.
I recently had a case where my client came in three times intending to file her divorce case and each time reconciled with her husband. There is nothing wrong with that, but her husband happened to be a compulsive gambler. By the time the third case started there were no assets at all to divide and to claim dissipation was too late.
Hence, if you think there has been dissipation you have two options: file your divorce case within the time periods described above and make a claim of dissipation, or try to have your spouse sign a post nuptial agreement describing the dissipation and agree to pay your share back to you even if the time is gone.
750 ILCS 5/503(d)(2)
(2) the dissipation by each party of the marital property, provided that a party's claim of dissipation is subject to the following conditions: (I) a notice of intent to claim dissipation shall be given no later than 60 days before trial or 30 days after discovery closes, whichever is later; (ii) the notice of intent to claim dissipation shall contain, at a minimum, a date or period of time during which the marriage began undergoing an irretrievable breakdown, an identification of the property dissipated, and a date or period of time during which the dissipation occurred; (iii) a certificate or service of the notice of intent to claim dissipation shall be filed with the clerk of the court and be served pursuant to applicable rules; (iv) no dissipation shall be deemed to have occurred prior to 3 years after the party claiming dissipation knew or should have known of the dissipation, but in no event prior to 5 years before the filing of the petition for dissolution of marriage, 750 ILCS 5/503.
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