Financial Issues in Divorce - Dissipation or "Waste" Claims
In Arizona, it is not uncommon for a spouse in a dissolution proceeding to assert a "waste" claim against the other spouse. The term "waste" does not appear in the Arizona statutes that define community property or relate to the dissolution of marriage.
The concept generally derives from the fact that both spouses in a marriage have a fiduciary relationship to each other that extends to the community estate and community assets. This means that spouses have a duty to act in a manner that serves the interests of the other spouse and the community estate as a whole. If a spouse uses or transfers community property for some purpose that does not benefit the community, the other spouse may have a viable claim that the community property has been dissipated, misused or "wasted."
Examples of "Waste" Claims
There are many examples of conduct which give rise to a claim for "waste". The simplest of them is when one of the spouses has gambled community funds during the marriage and sustained losses. Another is where a spouse has purchased gifts with community funds or transferred community money or other property to a person with whom the spouse is having an extramarital affair. When a spouse has had control of community assets or community income and is unable to account for the use of same, there is also potential for asserting a waste claim to funds that are not accounted for.
Courts across the U.S. have decided "waste" claims based upon conduct that has not yet been considered by the Arizona courts. These include financial assistance or gifts to parents and children not born of the marriage as well as other relatives, payments of spousal maintenance (alimony) and child support owed to former spouses, particularly where there is separate property available to make those payments but the payor chooses to make the payments from community property. Other courts have also granted relief for "waste" in cases where the offending spouse used community funds or earnings to purchase excessive alcohol or narcotics. Arizona has no reported decisions on some of the conduct courts in other jurisdictions have found to be waste, but conceptually these would be viable claims in Arizona.
How the Courts Respond to Dissipation
When waste or dissipation is established, the court will generally consider the value of the dissipated property as part of the value of the community estate. The total value of both the existing and the dissipated property is then divided with the dissipated property being accounted for as a distribution to the spouse who committed the wrongful act. When the community estate does not include enough property to compensate for waste, the court can award a money judgment against the spouse who has dissipated or wasted the assets.
Additionally in Arizona, by statute, the court is obligated to consider excessive or abnormal expenditures, destruction, concealment or fraudulent disposition of community, joint tenancy and other property held in common in determining the appropriate amount and duration of spousal maintenance or whether there should be a deviation in the child support amount.
Proving the amount that has been dissipated or wasted often requires engaging a forensic accountant. Early in the dissolution proceeding, a decision should be made as to the magnitude of the potential claim before the expense of hiring such an expert is incurred.
Claims for waste or dissipation of assets can be useful to not only obtain compensation for the money or property that the community has lost but also in obtaining a more favorable award of spousal maintenance or simply as leverage to negotiate a more favorable result in an adequate settlement.
About the author: Mitchell Reichman is an attorney with the Phoenix law firm of Jaburg & Wilk. He is a Certified Specialist in Family Law/Divorce by the State Bar of Arizona Board of Certification and has been recognized as a "Super Lawyer" in family law. Mitch has significant experience representing clients in high conflict divorces with substantial assets.