When a marriage breaks down, both parties are expected to act honestly and responsibly during financial negotiations. However, some individuals may deliberately spend, transfer, or dispose of assets to reduce what is available for division. This behaviour, known as asset dissipation, can significantly affect the outcome of a financial settlement and is taken seriously by the court. It often arises at a time when communication is strained, and trust has eroded, which makes early advice and careful financial scrutiny especially important.
What Is Considered Asset Dissipation?
Asset dissipation occurs when one spouse intentionally uses or disposes of marital assets to prevent the other from receiving a fair share. This may include:
- Making large or unnecessary purchases.
- Transferring money to friends or relatives.
- Selling property or investments below market value.
- Running up debts or excessive personal spending.
- Withdrawing or hiding cash from joint accounts.
The key issue is whether the spending was deliberate and intended to reduce the financial resources available for division. Ordinary living expenses or genuine business losses are treated differently from actions designed to conceal or diminish assets. Context also matters, as the court will consider the timing, scale, and explanation for the spending before reaching any conclusions.
How Does the Court Deal with Reckless Spending?
The Family Court has the power to address deliberate dissipation of assets. If it can be shown that one party has acted wantonly, recklessly or has intentionally reduced the value of the marital estate, the court may “add back” the value of the lost assets when determining a fair division. This approach ensures that the offending party does not benefit from their conduct or leave the other spouse unfairly disadvantaged.
This means the party responsible for the spending may receive a smaller share of the remaining assets to reflect what they have already used or wasted. The court’s overriding goal is to achieve fairness and ensure that neither party benefits from misconduct. In serious cases, the court may also take the behaviour into account when considering costs or when assessing the overall credibility of a party’s financial disclosure.
Proving Asset Dissipation
Establishing that a spouse has intentionally spent or hidden assets requires evidence. Financial disclosure is an essential part of divorce proceedings, and each party is legally obliged to provide full and accurate details of their income, assets, and liabilities.
If suspicious transactions or sudden changes in financial behaviour are identified, further investigation can be requested. Bank statements, credit card records, and property or business documentation can all help demonstrate the extent and timing of the spending. Evidence of unusual cash withdrawals, unexplained transfers, or rapid depletion of savings may raise particular concerns.
In more complex cases, forensic accountants may be instructed to trace funds or identify concealed assets. The court can also make orders requiring additional disclosure or cooperation from third parties if necessary. The sooner these issues are raised, the easier it becomes to identify patterns of behaviour and secure the information needed to support your case.
Key Considerations
Attempting to spend or conceal money to avoid a fair settlement rarely succeeds and can lead to serious consequences. The court has wide powers to ensure fairness and may adjust the division of assets or order cost penalties against the offending party. Transparency, accurate disclosure, and early legal advice are crucial to protect your financial position.
We Can Help
If you believe your spouse is spending or hiding money to avoid a fair divorce settlement, our family law specialists can provide expert advice and take swift action to safeguard your interests. We can help you investigate financial irregularities, secure disclosure, and ensure that the final settlement reflects the true value of the marital assets.
If you suspect your spouse is dissipating assets or acting dishonestly during your divorce, contact us to discuss your options.
