Is it Financial Misconduct or Poor Judgment?

In many relationships, one person is historically the "spender" and the other is the "saver." In a divorce, the saver may be surprised to learn that the spouse had not established any savings, or worse yet, has acquired substantial debt during the marriage. As to the first scenario, if one party routinely invested in their retirement plan, and the other saved nothing, the good saver’s retirement assets earned during the marriage will be equally divided and there will be no consequence to the fact that the other party did not save. For the most part, courts divide the savings acquired during the marriage, and don’t penalize the person who didn’t save. A court is not responsible for deciding what could or should have happened during the marriage. A saver is not rewarded and a spender is not punished.

Generally, debt incurred during the marriage is deemed marital debt regardless of whose name the debt is in and regardless of whether the debt was approved by or known by the other spouse. A very common example is when a spouse learns at the time of divorce that there is considerable credit card debt owed that he or she had no knowledge of. Using the same rationale as the example of one person who didn’t save for retirement, the law sees the debt as a shared responsibility. Had that person spent actual marital funds instead of incurring debt, there would be less assets to divide. Courts do not go back and decide if a person should have made certain purchases on their credit card, or lived beyond their means. Just as assets are shared, so are debts.

However, if these financial choices are determined to be financial misconduct, the Court may compensate the offended spouse with a distributive award or a greater award of marital property in the final property division. The Court defines financial misconduct as "the dissipation, destruction, concealment, nondisclosure, or fraudulent disposition of assets."

Proving financial misconduct on your spouse's part is a high bar to reach. The Courts have previously ruled that "an implicit element of financial misconduct is wrongdoing." In other words, it's not enough for your spouse to have made financially irresponsible decisions or for you to not have been made aware of all those decisions during the marriage. Instead, the Court looks at whether the offending spouse meant to profit from the misconduct or meant to intentionally lessen what you would be distributed in marital assets. 

Another factor a court may consider in determining financial misconduct is the timeline of when the alleged misconduct occurred. The Court will look more suspiciously at financial actions if these actions coincide with a divorce filing or separation. In a similar vein, whether the spending in question was normal during the marriage is a factor the Court considers – if a spouse historically spent outside of the couples’ means during the marriage, then those spending habits are more likely to be deemed financially irresponsible, but not financial misconduct warranting a remedy from the Court.

Determining whether your spouse's financial decisions reach the bar of becoming financial misconduct is a complex issue with many factors to consider. Speaking with an attorney about these issues can provide you with a helpful analysis.