As outlined in our CFL™ course, dissipation occurs when one spouse (without the other’s consent) uses marital funds or property for their own benefit for purposes not connected to the marriage.
The central question in the recent Florida appeals case of Welton v. Welton was whether the husband’s withdrawal from an IRA to pay certain debts qualified as dissipation of marital funds.
Leslie and Lynn Welton married in 1998. Mr. Welton filed for divorce in 2017, and Lynn counter-petitioned for alimony and an equitable distribution of their assets.
While the divorce case was pending, Leslie withdrew $130,000 from a 401(k) account and moved it into an IRA. He then withdrew $65,000 from the IRA, which incurred early withdrawal and other tax penalties.
He used the funds to pay debts incurred during the marriage under the couple’s names and his name. He didn’t pay any of Lynn’s debt. Meanwhile, Leslie was debt-free, but his wife owed creditors about $88,000. Leslie also sold $4,220.24 worth of stock from his employee plan, which he used to pay other marital debts.
Lynn argued that Leslie’s withdrawal of funds was an intentional dissipation of marital assets for non-marital purposes.
In its final judgment, the trial court found that Leslie “unilaterally cashed out his entire 401k thereby incurring significant taxes and penalties” and left only $65,000 in the rollover IRA account. It further noted that if he hadn’t cashed out the 401(k), he would not have incurred “additional and unnecessary penalties.” As for the stocks, the trial court adopted the wife’s equitable distribution schedule. The schedule noted that Leslie had sold an estimated $4,220.24 worth of stocks. The court assigned their full pre-sale value of $7,000 to him.
Florida Fourth District Court of Appeals Verdict
Citing prior Florida cases, the appeals court stated that except when dissipation results from intentional misconduct, it is generally wrong for a court to include dissipated assets in equitable distribution.
It also noted that at the trial court level, “competent, substantial evidence” must back up a court’s asset valuation.
The appellate court found that the trial court also erred in its findings regarding the husband’s dissipation of marital assets. To include dissipated assets in equitable distribution, the trial court must make a finding that the dissipation resulted from intentional misconduct. The appeals court ruling defined improper dissipation (according to Gentile v. Gentile) as the use of marital funds for a spouse’s own benefit and not for marital purposes while the marriage is undergoing an irreconcilable breakdown.
The trial court didn’t make any findings of dissipation from intentional misconduct through Leslie’s withdrawal of marital funds and there was no evidence in the record. Both parties’ testimony showed that he used the funds to pay marital debts rather than for purposes “unrelated to the marriage.”
“Assets depleted in such a manner cannot be included in an equitable distribution scheme. As such, the trial court erred in finding that the husband’s dissipation of the marital funds to pay off marital debts was intentional misconduct.”
Regarding the stock funds, the appeals court ruled that the inclusion of the pre-liquidation value of $7,000 in the equitable distribution was in error because there wasn’t enough viable evidence to support that judgment.
The appeals court decided that the lower court erroneously found the husband’s dissipation of marital assets to be the result of “intentional misconduct” and incorrectly valued his stock. It reversed the decision and returned the case to the trial court for further proceedings consistent with its opinion.
Learn how spouses can dissipate and hide marital funds in our Certified Financial Litigators (CFL™) course. The financial knowledge you gain can improve your family law practice and your ability to get more clients. Find out more in our free information packet today.