High-Risk Securities During Divorce

When one spouse historically controls the finances during a marriage, the spouse “in the dark” frequently seeks to investigate, and even question, the other’s money management choices once a divorce commences.

When money or assets obtained during the marriage are depleted for a “non-marital purpose” (i.e. a purpose that does not relate to the marriage), a spouse can make a legal claim of “dissipation”. If the court finds dissipation, the moving spouse typically receives a reimbursement for his or her share. Expenditures on extra-marital affairs and extravagant spending inconsistent with how the parties lived while the marriage was intact are the most common examples of dissipation.

Where a spouse invests in high-risk securities, the answer to whether or not “dissipation” has occurred is less clear. The answer largely turns on the specific circumstances and answering questions such as: did the spouses agree to such investments; did the investing spouse historically make such investments; again, did the other spouse know about the history of investments; did either spouse profit or lose money from the investment; did the spouse incur any other losses such as quitting his or her job to commence investment activity.

In a recent case originating in Lake County, Illinois, the Second District Appellate Court found that the trial court properly held that the husband dissipated much of the marital estate by removing funds from marital accounts and using them to engage in high-risk securities trading, without telling his wife. The evidence showed that husband, who was the sole financial provider for his wife and 3 children, was aware of devastating effect that his conduct could have on his family, including quitting his high-paying job, and showing extreme recklessness. See In re Marriage of Schneeweis, 2016 IL App (2d) 140147 (June 22, 2016).

Another alternative to filing a dissipation claim, may be to seek that the court order the spouse to restore the funds to the original account as soon as possible. The funds may then be restricted, via court order, until the final allocation of the funds is resolved. Alternatively, the funds could be restored and then advanced to each spouse in equal pre-distributions. The investing spouse could continue high-risk trading with his/her advanced share. If possible, seeking relief as early as possible, prior to the funds being depleted, is clearly more practical than waiting to file a dissipation claim.

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