Uncovering the Hidden Consequences of Marital Waste

Marital waste is when one spouse spends community money, or community assets irresponsibly or for their sole benefit. For example, buying a brand new sports car or going on a lavish shopping spree could be marital waste.

What Happens to Community Property in a Divorce?
Nevada is one of nine community property states. Which means that anything earned during the marriage is owned by both partners. It doesn’t matter whose name the asset is under. Up until 1993, Nevada divided community property based on “fairness”. They could award one spouse more of the community property than the other. Now the court must divide the property equally between spouses. The exception is when there is a case of marital waste involved.  When cases of marital waste come up, the spouse who spent the money must show where that money went.  The judge will then decide whether the spent money counts as marital waste.

How are Community Assets Divided When There is Marital Waste?
When the community assets and marital waste get totaled up, the amount wasted gets subtracted from the total. For example, let’s say Sally and Bob file for divorce. They have $50,000 in their shared savings account.  Normally, the court splits the $50,000 in half. Sally and Bob each get $25,000. Except, Sally decides  to take $20,000 to Ceasar’s and put it all on black.  Sally loses the $20,000. There is now only $30,000 left in the account.   Should Bob only get $15,000?   No,  the courts view Sally as wasting $20,000, and therefore will not penalize Bob.   Bob gets $25,000, like he would originally, and Sally gets $5,000.

Types of Marital Waste
The Nevada Family Courts recognize  a few types of marital waste.

  • Extravagant amounts spent on extra marital affairs
  • Transfer of assets before legal separation or divorce
  • Sale of community property below market value
  • Unreasonable spending or business expenses
  • Illegal gambling, drugs, or prostitution

Excessive Spending
It is not uncommon for one spouse to take lavish vacations or buy a new car during a divorce. So the question becomes, is that normal for that spouse’s lifestyle?  If extravagant spending is normal, it’s more challenging to make an accusation of marital waste. It’s not malicious, it’s normal. Alternatively, if the spouse in question is normally frugal, you might have a good shot at making a case for marital waste.  In Putterman v. Putterman, (1997),  The husband refused to account for his income and charged several thousand dollars on their combined credit card. This was not normal for the husband, therefore the court decided the husband’s spending counted as marital waste.

Gambling as waste is a little tricky in Nevada.  We are the gambling capital of the world.   Habitual gambling both spouses know about will not normally be considered waste.  Non-habitual gambling can be marital waste.   Let’s say Bob and Sally gambled together before deciding to get divorced. After filing for divorce, Sally gambled away some of their communal assets. Because gambling was something they did together, the court might interpret that as Bob’s consent to Sally’s lifestyle. If Sally had a habit of going down to the casinos every week and Bob had no objection prior to divorce, that could  be consent. If Bob had encouraged Sally to seek help for a gambling addition, and this is why he filed for divorce, then Bob may have a better argument of marital waste.

Transfer of Property
Intentionally losing, selling, or transferring property or assets is marital waste. Doubly so if one of the spouses violates a court order in doing so.  In Lofgren v. Lofgren (1996) , the husband transferred community property to his father for less than nothing.  This is marital waste.   The court valued the transferred property, ignoring how much he charged his father, and equally distributed the amount between the spouses.

Negligent Investments
Any increase in the value of an investment during marriage years becomes community property. Therefore intentional bad investments could be marital waste.  It gets complicated because investments are often risky and lose money. Courts will frequently look at investment habits. They must judge whether the spouse in questions made investments (even bad ones) to benefit the marriage.  On the other hand, failure to take advantage of an investment is not marital waste. Neither is failure to seize an opportunity to made a lucrative business deal.

Payment of Other Support Obligations
Using community assets to pay for things like child support or legal fees is not generally seen as marital waste.  The primary consideration for the courts is whether or not one spouse used the money with an intent to injure the other.

Business Expenditures
Money spent on a business owned by one or both spouse is not waste in most cases. Although if the business becomes neglected or mismanaged, there could be cause for allegations of marital waste.

What Should I Do if My Spouse is Spending Money During a Divorce?
Talk to your lawyer about it. He or she can help you determine if you have a case for marital waste.   It would also be wise to document to the best of your ability if this is normal behavior. Has your spouse always spent money like this? Is this a sudden change in behavior that might be to try and get more of the assets?

What Happens if My Spouse is Hiding Money During a Divorce?
Your divorce lawyer will have a better understanding of your situation and be able to advise you. Many people will end up hiring private investigators to find out if this is the case.  The penalties for hiding assets is stiff. Judges can impose sanctions, force the offending spouses to repay, or force the offending spouse to give up their entire share of an asset.

Hidden Assets In Divorce: Are They Discoverable?
Yes. This can be time consuming and costly. It may be wise to consider whether it is a financially smart decision to pursue. Divorce is naturally emotional. The cost of the investigation into hidden assets might outweigh your financial gain from the discovery of those assets.  Look for discrepancies in reported income/assets versus lifestyle. Below is a list of good places to start.

  • Income Tax Returns
  • Savings Accounts
  • Money Market Funds
  • Checking Accounts (Look for cancelled checks)
  • Cash flow in a business
  • Credit Card Statements
  • Credit Reports
  • Insurance Statements
  • Off shore accounts
  • Loan Applications
  • Personal Net Worth Statements
  • Public Records Check

Worried about marital waste in your divorce? Call one of our divorce attorneys to discuss your options. (702) 914-0400.

author avatar
Stacy Rocheleau, Esq.