Analysis of the Dissiptaion of Marital Funds
(Provided by National Legal Research Group, Inc.)

The law on this subject may be less disparate than it appears. When proper notice is taken of differing rules on the date of classification, much of the variance among the cases can be harmonized.

In Missouri and Utah, marital property is classified as of the date of divorce, and all income earned before the actual date of the decree is marital property. Given this fact, temporary support in both states literally must be paid with marital income. If such payment is dissipation, then obligors with no separate property will have no permissible source for support payments. This is an absurd result. In states where the date of classification is the date of divorce, the payment of temporary support should not be dissipation.

In Ohio, marital property is classified as of the date of separation. Ordinarily, post-separation temporary support should be paid from post-separation income. Such support should not be paid from marital funds, while available post-separation separate income is saved for the obligor’s personal benefit. Given Ohio’s rule on the date of classification, the Ohio cases make sense.

The case which stands out in this analysis is Thomas, for, like Ohio, Virginia classifies property as of the date of separation. The court was correct to note that there should be no difference between voluntary and involuntary payment of support. But post-separation support, whether voluntary or involuntary, should be paid first from post-separation income. Otherwise, payors will use marital property to pay support, while saving post-separation income the very income upon which a temporary support obligation is founded. This is a bad result. An earlier Virginia trial court opinion explained why:

Virginia’s waste jurisprudence [previously] required the finest and most ethical domestic relations attorneys to advise all of their clients to utilize marital property for all of their post-separation expenditures, while establishing new bank accounts into which they would deposit all of their post-separation earnings. As these non-commingled post-separation earnings would be separate property, they could not be reached or considered in any equitable distribution award. Indeed, an unqualified right to utilize marital funds for post-separation living expenses would allow an employed husband, who had access to the parties’ sole marital bank account containing $50,000, to spend all of those funds on his own attorney’s fees and living expenses while building up his own separate $50,000 account, which would not be subject to equitable distribution. He would therefore leave his unemployed wife without any marital property to be equitably distributed and without any means of paying her attorney’s fees. Such a result would be utterly inconsistent with the goals of the General Assembly in its enactment of [the equitable distribution statute].

Holland v. Holland, 1999 WL 262433, at *9 (Fairfax County, Va., Cir. Ct. 1999).

The problem with Thomas is not the court’s analogy between temporary support and living expenses. The problem, rather, is with the court’s broad assumption that all living expenses are marital in nature. As a general rule, ordinarily living expenses should be paid from income earned at the time the expenses accrued. That is why living expenses paid before the marriage, and living expenses paid after the end of the divorce case, are nonmarital expenses. For equitable distribution purposes, however, Virginia deems that the marriage ends on the date of final separation. Since income earned after that date is separate property, Dietz v. Dietz, 17 Va. App. 203, 436 S.E.2d 463 (1993), living expenses incurred after that date should be nonmarital expenses. Otherwise, as Holland recognizes, the parties will be positively encouraged to live off of marital savings, while hoarding post-separation income.

The cases finding post-separation living expenses to be marital are not inconsistent with this analysis, for in those states the date of classification is generally the date of divorce. Where post-separation income is separate property, as in Ohio, the presumptive rule should be that post-separation living expenses are to be paid from post-separation income.

This should not, however, be an absolute rule. Where post-separation income exists, it should certainly be used first to pay living expenses. The problem is that many dependent spouses are unable to live at their accustomed marital standard of living, based upon post-separation income alone. These are the cases in which the court will award temporary support, once an action is filed and a support hearing can be scheduled. At a minimum, a spouse does not act improperly by consuming marital funds to live at the normal marital standard of living, before entry of a temporary support order, so long as post-separation income (if any) is consumed first. There is even a reasonable argument for allowing spouses to live at the marital standard of living after entry of the temporary support order, as temporary support awards are set without full evidentiary hearings, for the purpose of maintaining the status quo during the pendency of the action. Because of their abbreviated evidentiary basis, temporary support awards are generally not a material factor in determining permanent awards. For the same reason, it is doubtful that the mere existence of a temporary support award should prevent the support recipient from spending marital funds to live at the normal marital standard of living.

The key point, however, is that living expenses paid after the date of classification should be paid first from whatever post-separation income exists. Stated differently, spouses should not be allowed to live off of marital savings while hoarding their own post-date-of-classification income. Once post-separation income is exhausted, there is every reason to permit the liberal use of marital funds to pay reasonable living expenses. While post-date-of-classification income remains, however, use of the marital funds to pay living expenses or temporary support should be dissipation.

Information provided by:
National Legal Research Group, Inc.

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