Understanding Dissipation or ‘Wasting’ of Family Assets

Before property is divided upon divorce, one of the parties may hold and have control over the particular asset. This may raise concerns for the other party, who may believe that the spouse controlling the property may be ‘wasting’ the asset, meaning that they are decreasing the value of the asset in some way, which would limit the value of family assets to be divided. This is especially significant when there has been a long period between the date of separation and the date of trial. The court can consider the legal principles involved in finding that there is ‘wasting’ or dissipation of family assets when determining whether to divide the property unequally. 

This post will discuss the court’s considerations for property division unequally because one spouse has dissipated one or more of the assets. We will provide key takeaways for those concerned with a spouse who controls certain family property in a way that may decrease the asset’s value. In addition, we also examine a case example to illustrate how the court applies the factors for finding there has been a dissipation of family assets. 

Legislative Framework for Dissipation and Unequal Division of Family Property 

According to s. 7(4) of the Matrimonial Property Act, it is presumed that matrimonial property (unless that property is otherwise exempt) will be divided equally unless it is not just or equitable to do so. At s. 8(l) of the Matrimonial Property Act, when determining if unequal division is necessary, the court can consider whether one spouse has dissipated the assets to the detriment of the other spouse. 

Dissipation of Assets Must Be Intentional 

If an asset has decreased in value from the time of separation to the date of trial, this does not automatically mean that the asset has been dissipated. To find that there has been dissipation by a spouse, there must be evidence of an intention to do so. It is optional to find that the party intended to deprive the other of a fair distribution of property specifically. Still, the requirement can be satisfied if the party intends to dissipate assets to benefit themselves. 

The court will look for evidence that the dissipating spouse acted in bad faith or was neglectful, which is highly fact-dependent. 

Dissipation Must Be Detrimental to the Other Spouse 

It must also be shown that the spouse controlling matrimonial property had dissipated the asset in such a way to the actual detriment of the other spouse. 

The court is unlikely to find that there has been a dissipation of assets if the reduced value of assets resulted from reasonable expenditures made to maintain the existing matrimonial property or if the expenditures were made on behalf of the family. In these circumstances, where a spouse may need to decrease the value of an asset to maintain the existing property or make expenditures to support the family, the court will consider if the expenditures could have been paid out of income rather than the assets. 

It is also important to note that using the matrimonial assets for personal expenses rather than for the family or matrimonial property may be considered dissipation if those personal expenses do not benefit the other party. 

Generally, a detriment would involve a one-half reduction in the asset’s value or more. 

Tracing of Assets May Apply 

The court can also trace assets where they are sold or reduced in value and put into obtaining another asset. It will not be considered dissipation if the proceeds of the sale of an asset are put into another asset that can be traced. Therefore, instead of dissipation, the new assets would be part of the pool of assets that can be distributed between the parties. 

Court Can Consider How the Asset Was Sold

A party may also have concerns about how the assets are sold if the proceeds are less than the asset’s fair market value. The court can consider the circumstances of the sale, including whether it was completed in a thoughtless, hasty, or fraudulent manner. 

Also, if the asset was sold pursuant to negotiations before separation, the court may not consider its dissipation. 

The court has the discretion to consider the entire context to determine if there has been dissipation of any matrimonial property. 

Court Can Compare Spending Before And After Separation 

The court can consider and compare spending patterns before and after separation in its analysis. The court will see if post-separation spending is significantly different than before separation, which acts as a reference point. 

Party Seeking Unequal Division Must Prove Dissipation 

It is up to the party seeking unequal division to provide evidence that the other spouse has dissipated matrimonial assets. They would need to provide evidence to establish the factors described above. 

Case Example: Kuzuchar v. Kuzuchar, 2023 ABKB 135

In the Kuzuchar case, the court acknowledges the difficulty in some cases for a party to provide evidence of dissipated assets. In this case, the wife was required to establish that the husband ‘wasted’ the RRSPs. However, the husband did not adequately disclose what had happened to the funds. As a result, the court drew an adverse inference against him, and he was required to account for the RRSP funds. 

The parties also had a TD investment. The husband had liquidated the investment and used it to pay off matrimonial debt. The wife claimed that the husband sold the investment at a loss, and she was seeking half of the original investment. The court did not find that the husband sold the investment at a loss, as there was no evidence to suggest this, and instead, there was evidence to suggest that it was a capital gain. 

The court did find, however, that the husband enjoyed a personal benefit of monthly income from the investment, which was a matrimonial property that had not been shared with the wife. The court found that the liquidation proceeds were used to pay off matrimonial debt rather than the husband’s personal expenses. However, the court also considered that the expenses could have been paid out of his personal expenses rather than from the matrimonial property, which prevented the wife from receiving fair distribution of the property. The court, therefore, concluded that he had dissipated the TD investment. 

The husband also accused the wife of gambling, dissipating the matrimonial property. However, these claims involved incidents during the marriage and were considered part of the marital spending, as he had only raised this issue after separation. The court found that punishing a spouse for a spending pattern accepted by the other party during the marriage would not be fair. There was no dissipation of assets based on gambling. 

Mincher Koeman Family Lawyers Can Assist with Property Division Involving Dissipation of Matrimonial Assets

Sometimes, a spouse may decrease the value or ‘waste’ matrimonial property, raising property division issues. As these matters primarily depend on the case’s unique circumstances, you should speak with one of our family law lawyers at Mincher Koeman, who are experienced in assisting parties in property division issues involving the dissipation of matrimonial assets. Our Calgary family law lawyers are dedicated to finding the best resolution for you after your divorce.

To book a consultation, please contact us online or by phone at 403-910-3000.