When a divorce is on the horizon, sometimes otherwise honest spouses start to act out of character. This can often take the form of going on a spending spree. This spending spree often leaves both spouses with more debt than they can usually afford by the time the divorce is over. Today’s blog will discuss how to recognize when a spouse is wasting assets and what can be done about it during your Texas divorce.
What is Wasting Assets in a Texas Divorce?
Wasting of assets can happen during a marriage or during a divorce. A spouse who wastes assets is one who squanders a couple’s savings or racks up credit card debt either during marriage or during the Texas divorce process.
A good faith use of money or an investment that does not work out does not constitute wasting assets. However, misuse of community property resulting in losses may give rise to a claim of wasted assets. Some examples of wasteful spending may include:
- Gambling debts
- Expensive gifts to family members or friends
- Money spent on an extramarital affair or lover
- Extreme spending from a couple’s joint account or credit cards
- A new loan taken out without the other spouse’s knowledge or approval
- New car purchase
- Major business losses
- Significant stock investments.
- Getting elective surgeries
- Getting teeth fixed
- Fixing up and making significant improvements to separate property
- Using joint account money to pay down credit cards or other loans
- Buying household items that will be needed to set up a new residence post-divorce with joint credit cards or joint bank accounts
Fraud on the Community—Division and Disposition of Reconstituted Estate
Constructive fraud, waste, and breach of fiduciary duty all mean basically the same thing in the context of a divorce.
These claims can be asserted under family code during the divorce.
Does a spouse owe another spouse a fiduciary duty in Texas?
A fiduciary duty would mean they have a legal obligation to act in the best interest of another (the other spouse).
The Texas Supreme Court found that there is unquestionably a fiduciary relationship owed by the spouses to each other and to the management of the community estate. (Schlueter v. Schlueter, 975 S.W.2d 584 [Tex. 1998])
To prove actual fraud, a spouse must show the other spouse transferred community property for the primary purpose of depriving the claimant of the property with dishonesty or an intent to deceive, which resulted in harm to the community estate.
The spouse alleging actual fraud has the burden of proof, which can be more difficult than constructive fraud because they have to prove their spouse acted dishonestly or with the intent to deceive
The argument for constructive fraud is generally that a spouse has breached their fiduciary duty to their spouse in some way. Thus, if a spouse is misappropriating marital funds or assets from the community estate, they are not acting in the best interest of the other spouse.
Constructive fraud transfers the burden of proof to the spouse who made the transfers to show the transfers were fair.
Factors a Texas divorce court will consider in determining whether there has been constructive include:
- The relationship between the spouse and the recipient;
- The size of the gift or transfer in relation to the total size of the community estate;
- The adequacy of the estate remaining to support the other spouse in spite of the gift or the transfer; and
- Any special justifying factors for the gift or transfer.
Section Texas Family Code Section 7.009 states that:
(a) In this section, "reconstituted estate" means the total value of the community estate that would exist if an actual or constructive fraud on the community had not occurred.
(b) If the trier of fact determines that a spouse has committed actual or constructive fraud on the community, the court shall:
(1) calculate the value by which the community estate was depleted as a result of the fraud on the community and calculate the amount of the reconstituted estate; and
(2) divide the value of the reconstituted estate between the parties in a manner the court deems just and right.
(c) In making a just and right division of the reconstituted estate under Section 7.001, the court may grant any legal or equitable relief necessary to accomplish a just and right division, including:
(1) awarding to the wronged spouse an appropriate share of the community estate remaining after the actual or constructive fraud on the community;
(2) awarding a money judgment in favor of the wronged spouse against the spouse who committed the actual or constructive fraud on the community; or
(3) awarding to the wronged spouse both a money judgment and an appropriate share of the community estate.
This basically means if waste is determined, the innocent spouse may have a claim for reimbursement.
What Happens if a Judge Determines My Spouse Wasted Assets?
If wasting of assets can be proven, a judge can consider that when deciding how to divide marital property, to ensure the innocent spouse is reimbursed. A judge has few options including:
- Awarding the wronged spouse an appropriate amount of the community property
- Awarding a money judgment in favor of wrong spouse against the spouse who committed the wrong or
Spousal Maintenance or Alimony
If a court determines that a spouse is entitled to post-divorce spousal maintenance or alimony, the court can also consider any fraud as a factor when determining an amount of spousal maintenance.
Texas Family Code Sec. 8.052 states:
A court that determines that a spouse is eligible to receive maintenance under this chapter shall determine the nature, amount, duration, and manner of periodic payments by considering all relevant factors, including:
(6) acts by either spouse resulting in excessive or abnormal expenditures or destruction, concealment, or fraudulent disposition of community property, joint tenancy, or other property held in common;
If you want to know more about what you can do, CLICK the button below to get your FREE E-book: “16 Steps to Help You Plan & Prepare for Your Texas Divorce”
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Law Office of Bryan Fagan | Spring Divorce Lawyers
The Law Office of Bryan Fagan routinely handles matters that affect children and families. If you have questions regarding divorce, it's important to speak with one of our Spring, TX Divorce Lawyers right away to protect your rights.
Our divorce lawyers in Spring TX are skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan handles Divorce cases in Spring, Texas, Cypress, Spring, Klein, Humble, Kingwood, Tomball, The Woodlands, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County and Waller County.