I. Legislative History of Dissipation | II. Treatment of Dissipation in Division of Property | III. What's a "Marital Purpose"? | IV. What Role Does Marital "Breakdown" Play in a Dissipation Case? | V. The Burden of Proof; "Clear and Specific" or "Clear and Convincing"? | VI. The Importance of Documentation | VII. Examples from the Cases | VIII. Conclusion

Dissipation of Marital Assets in Illinois: A Review

By Richard W. Zuckerman

What constitutes impermissible spending; i.e., "dissipation"; of marital assets by a spouse in a failing marriage? Here's a review of the cases, along with pointers for lawyers on either side of a dissipation case.

Marital misconduct is not a factor in the distribution of property in an Illinois divorce, unless that "misconduct" is in the form of one spouse unilaterally spending, or "dissipating," the financial assets of the marriage. The Illinois Supreme Court has defined dissipation of marital assets as "the use of marital property for the sole benefit of one of the spouses for a purpose unrelated to the marriage at a time the marriage is undergoing an irreconcilable breakdown."¹ Like most legal definitions, this one leaves room for a host of litigable issues.

What, for instance, is "a purpose unrelated to the marriage"? At what point has the marriage undergone a "breakdown"? Beyond that, what is the burden of proof in a dissipation claim? This article explores these and other issues in light of the statutory and case law and offers tips for lawyers representing either side in a dissipation dispute (see sidebars).

FYI . . .  Side Bar  • Tips for representing the spouse claiming dissipation  • Tips for representing the party accused of dissipation

I. Legislative History of Dissipation

The concept of dissipation as a specific factor for consideration in the division of property as part of a divorce action was unknown under the original Divorce Act (chapter 40 of the Illinois Revised Statutes), although fraud and the conduct of the parties could be considered under the concept of "special equities." The original Marriage and Dissolution of Marriage Act as enacted in PA 80-0923, which became effective October 1, 1977, incorporated section 307 of the Uniform Marriage and Divorce Act and stated under the relevant factors of chapter 40, section 503, as follows:

(c) [The court] shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors, including:

(1) the contribution or dissipation of each party in the acquisition, preservation, or depreciation or appreciation in value, of the marital and non-marital property, including the contribution of a spouse as a homemaker or to the family unit;....

In 1983 the passage of PA 83-0129 (effective August 19, 1983) caused subsection (c) to become subsection (d). In 1993, PA 87-0881 (effective January 1, 1993) created the current 750 ILCS 5/503(d)(2) which reads as follows:

(d) ...It shall also divide the marital property without regard to marital misconduct in just proportions considering all relevant factors, including: the dissipation by each party of the marital or non-marital property;....

II. Treatment of Dissipation in Division of Property

The initial case decisions that made specific reference to dissipation considered it simply another factor under section 503 in the division of marital property. For example, in the 1979 case Stallings v Stallings² the court upheld a 100 percent award of marital property to the wife based on a consideration of all of the 503(c) factors. The justices specifically rejected the husband's claim that there was no proof dissipation or failure to contribute to the marriage and marital assets, stating that it was a credibility question that had been resolved against him.

Similarly, in Estate of Chandler the court stated as follows: "The dissipation of marital assets by one spouse in contemplation of divorce has never been and is not now an acceptable practice in Illinois....Section 503(c)(1) of the new Dissolution Act specifically allows the court to compensate the disadvantaged spouse by considering such conduct in the division of property."³

In addition, the courts made allowance for one party's dissipation by awarding the other party one-half of the dissipated amount, either as a payment of cash or in property. The manner in which the injured spouse was compensated for the dissipation depended on the facts in each case.

Of course, not all of the courts' more creative approaches to compensation were approved. For example, an attempt to reduce the husband's child support payment to repay the wife's dissipation was rejected by the appellate court in IRMO DiFatta.⁴ The trial court had not considered all of the factors under 750 ILCS 5/505(a)(2) and, in any event, dissipation of marital assets was not one of those factors for deviation from the statutory guidelines. The trial court was directed to recalculate the child support and devise a more appropriate method of compensating the husband for the wife's dissipation of life insurance proceeds and a personal injury settlement.

III. What's a "Marital Purpose"?

The early dissipation cases struggled to determine whether the purportedly dissipated assets were used for a "marital purpose." In Klingberg v Klingberg,⁵ the appellate court reversed the trial court's "no dissipation" finding. In that case, the husband's paid $3,500 in "future" child support to his former wife from a joint account with his then-current wife when he and the current wife separated.

The appellate court reasoned that the payment was not made for a marital purpose, writing as follows:

The record establishes that the respondent withdrew a substantial portion of the joint account at the time that he and the petitioner separated. He then gave this money to his former wife for child support, although he was not then in arrears in these payments. The dispersion of the funds in this manner demonstrates that the payment was not made for any marital purpose....Rather, the respondent's action was designed to use marital property for his sole benefit and for a purpose unrelated to the marriage, at a time that the marriage was undergoing an irreconcilable breakdown.⁶

By contrast, the appellate court in IRMO Reeser⁷ reversed the trial court, which found dissipation by the husband and considered it in arriving at a 57/43 percent property division in favor of the wife. At issue was the husband's racing hobby. Because there was no evidence at trial that the wife disapproved of the hobby or did not enjoy or otherwise participate in it, the appellate court reversed and remanded.

The marital-purpose issue also arose in IRMO Partyka.⁸ The wife claimed that the husband dissipated $77,000 in marital assets that should have been, but was not, charged against his share of the marital estate.

The appellate court found that the husband failed to substantiate a number of his claims as to the use of the money by clear and specific evidence. In addition, the court found that many claimed expenses were not for marital purposes, including rent and furnishings for his apartment, attorney fees, "spending" money, trips, and utilities for his residence. The appellate court ordered the trial court to enter a finding that the husband dissipated $63,776.57, to charge his share of the marital property with that amount, and to take the dissipation into consideration in redistributing the marital property.

But in IRMO Calisoff,⁹ the trial court finding of dissipation was reversed for failure to consider the marital purpose of certain expenditures. The appellate court found that the husband had substantiated the following payments, among others, as being for marital purposes by "exhaustive" proof: his use of proceeds from his HR-10 Plan to pay an income tax lien on the marital home and other living expenses, and his expenditure of receipts from a stock sale to pay child and business expenses. The case was remanded for redistribution of the property and debts without consideration of the dissipation.

IV. What Role Does Marital "Breakdown" Play in a Dissipation Case?

A. Early Cases

In the 1981 case Hellwig v Hellwig,¹⁰ the appellate court held that it would be too restrictive to find dissipation only after "the marital property [had been] sold or transferred at the time of separation or after dissolution proceedings" had been commenced. This issue of timing of the alleged dissipation in relation to the proceedings between the parties arose repeatedly as the law of dissipation developed in the '80s.

In IRMO Kaplan,¹¹ for example, the husband was found to have dissipated unreported income of $25,000 and to have given a woman friend $10,000. The $35,000 was credited to his side of the ledger in the property division. The alleged dissipation took place during the six years between the entry of the judgment dissolving the marriage and the final hearing on the property division.

The husband defended on the basis that the marriage was not undergoing an irretrievable breakdown at that time. The court, citing Hellwig, stated that "[t]he determinative issue here is not the precise time at which the dissipation occurred but the fact that the respondent used marital property for his own benefit and for a purpose unrelated to the marriage during a period when only he had access to the funds."¹² The finding of dissipation was upheld, as was the division of property.

B. The O'Neill Appellate Court Ruling

In 1989 the issue of defining "irreconcilable" or "irretrievable" marital breakdown began coming to a head. In IRMO O'Neill,¹³ the issue was the expenditure of $15,000 by the parties for attorney fees to defend the husband in a criminal case for attempted rape. The husband claimed innocence, was tried and convicted, and ultimately admitted guilt. The wife testified during the dissolution trial that she did not know whether she would have authorized the expenditure had she known her husband was guilty.

The trial court found that the marriage was not undergoing an irreconcilable breakdown and found no dissipation. The appellate court, in a stunning break from prior case law, "repudiate[d] any ruling that says dissipation is limited in time to conduct that takes place during an irreconcilable breakdown of the marriage."¹⁴

The appellate court pointed out that nothing in the IMDMA limited dissipation to such periods, comparing dissipation to contribution, to which no time limit applies. The court also dismissed the fact that the wife had acquiesced in the payment and concluded that her conduct was only one factor to be considered. The husband was found to have dissipated the $15,000 and the case was remanded.

C. The O'Neill Supreme Court Ruling

Appellate courts responded in various ways to the fourth district's O'Neill ruling.¹⁵ Finally, the Illinois Supreme Court resolved the issue of how far back a court may look to find dissipation when it reviewed the O'Neill case. In the 1990 case In re Marriage of O'Neill,¹⁶ the court analyzed dissipation in light of the legislative history of the statute and appellate court interpretations since its enactment.

After applying the usual rules of statutory construction, the supreme court adopted the definition of dissipation quoted at the beginning of this article, which specifies that dissipation can only occur when "the marriage is undergoing an irreconcilable breakdown."¹⁷ Because there was no claim that the $15,000 at issue was spent on attorney fees at that point in the relationship, there was no dissipation. Justice Stamos, joined by Justice Miller, wrote a lengthy dissent defending the appellate court's construction of the term and arguing for the proposition that dissipation could occur anytime during the marriage.

Although the courts now had a uniform definition for dissipation, cases continued to refine the O'Neill rule. In IRMO Hazel,¹⁸ the wife attempted to have the meaning of "undergoing" interpreted to cover the period from when trouble in the marriage first arose to the actual breakdown itself. This argument was rejected by the appellate court as too onerous and broadly inclusive. The trial judge's use of a date that was not disputed by the parties was upheld in the appeal.

The issue of the date of breakdown is still often litigated. In IRMO Carter,¹⁹ for example, the trial court found the pertinent month to be July 1999. The appellate court evaluated the evidence and found the appropriate date to be in 1992, when the parties had reconciled and the husband had agreed not to incur anymore gambling-related debt. Thereafter they lived almost separate lives, including separation of finances. The case was remanded for consideration of the husband's gambling debt and his explanations for other expenditures and indebtedness using the 1992 date.

V. The Burden of Proof; "Clear and Specific" or "Clear and Convincing"?

The case of IRMO Block²⁰ illustrates another issue that arose in dissipation cases; the burden of proving dissipation. In Block, the husband took out a second mortgage on marital real estate. The trial court found the mortgage to be an intentional dissipation of marital assets incurred in contemplation of divorce. The husband claimed it was incurred to pay living expenses and lifestyle debt.

The appellate court reversed because of the "meager evidence bearing on the use and purposes of the mortgage" and remanded that issue for reconsideration. In contrast, the same court upheld the trial court's finding that the husband's incurring debt to purchase a racing boat shortly after the parties' separation was, in fact, dissipation and that the trial court was justified in considering it in the property division.²¹

The burden-of-proof issue was confronted directly in IRMO Smith.²² The appellate court reviewed all Illinois cases, together with those from other jurisdictions, and concluded that

[f]rom these Illinois and foreign jurisdiction cases, we can extract the general principle that the person charged with the dissipation is under an obligation to establish by clear and specific evidence how the funds were spent. General and vague statements that the funds were spent on marital expenses or to pay bills are inadequate to avoid a finding of dissipation.²³

The court went on to conclude that sales of real estate, stock, certificates of deposit, a truck, a boat, bank accounts, and money spent on a paramour totaling between $50,000 and $80,000 were dissipation, and the trial court's allocation of property was proper. Smith became the touchstone for cases involving the issue of burden of proof.

The appellate court specifically rejected a claim that the burden of proof was "clear and convincing evidence" in the 1992 case IRMO Hagshenas.²⁴ The court made it clear that the standard revolved around the amount and credibility of proof and was fact specific to each case. The trial court found that those living expenses that the husband properly accounted for did not constitute dissipation. The living expenses that the husband could not document or that were found to be excessive, selfish, or improper did constitute dissipation, and he was charged with $160,141 for those.

More recently, however, cases such as IRMO Gurda²⁵ do refer to the "clear and convincing evidence" standard as the burden on the party defending against the dissipation claim once a prima facie case is established.

VI. The Importance of Documentation

The importance of thoroughly documenting the use of the allegedly dissipated assets is underscored in the reported cases. In IRMO Smith,²⁶ for example, the trial court's finding of dissipation of $15,000 from a credit union account was upheld, partly because the husband failed to present his record of expenditures for the money and because his vague testimony presented a question of credibility that was resolved against him.

Alternatively, in IRMO Sevon,²⁷ the appellate court upheld a finding of no dissipation where the wife had a complete list of every payment, each of which the trial court found to be for a necessary family expense.

VII. Examples from the Cases

Dissipation cases sometimes involve gambling, paramours, extraordinary and undocumented expenses, and the disappearance of marital funds under the control of one party.

Case law also holds that the failure to preserve assets could amount to dissipation. In IRMO Cook,²⁸ the trial court found that the husband's failure to make mortgage and tax payments leading to foreclosure and threat of foreclosure on marital real estate was properly considered dissipation by the trial judge in dividing and awarding the majority of the marital property to the wife.

In IRMO Siegel,²⁹ the husband was ordered to pay $30,000 to the wife as one-half of the equity in the marital residence lost through foreclosure. The award, which essentially constituted one-half of the marital estate, was upheld. The court also ruled that dissipation could be found though there was no personal benefit to the dissipater.

Similarly in IRMO Thomas, ³⁰ the appellate court found that "[c]ausing or allowing the devaluation of the marital business [was] no less dissipation than allowing the devaluation of the marital home," upholding the trial court finding of dissipation by the husband.

Dissipation claims have also arisen over living expenses after separation, as illustrated by IRMO Seversen.³¹ In this case, the wife was barred by court order from the former marital home and subsequently resided with her daughter. The husband claimed that wife had dissipated $80,000 from a termination benefit from her employment, including the amount she spent on living expenses.

The appellate court disagreed, finding that the money was received and spent after the irretrievable breakdown of the marriage. The wife's detailed accounting of her expenses satisfied the documentation requirement. The court distinguished the cases that found the use of marital funds for living expenses to be dissipation and concluded:

The dichotomous treatment of spouses based on the location of their residence while they are in the process of dissolving their marriage defies reason and reality. During the marriage, the spouses do not differ in the need for usual living expenses. During the dissolution process, the needs of each party remains unchanged yet the disparate application of the dissipation principle penalizes one spouse while it condones the same type of expenditures for the other spouse.³²

Because the trial court's order required the wife to maintain a separate residence, her accounting was sustained and no dissipation was found. The appellate court did find that $20,000 used to buy stock and $2,000 to buy a computer were dissipation and reduced the dissipation charged to wife by $58,000.

An unusual type of dissipation was at the heart of IRMO Lee.³³ The husband transferred $166,719 in marital assets to the parties' children three months prior to separation. He transferred another $100,000 on or near the date of the separation.

The appellate court agreed with the trial court's finding that both of these transfers were dissipation by the husband. The court rejected the husband's argument that the transfers were for the benefit of the children: "A transfer of marital assets does not escape classification as dissipation merely because it is to, or for, the benefit of children of the marriage. Expenditures for the children's immediate reasonable needs are a permissible use of marital funds. However, excessive expenditures, even if for a permissible purpose, may constitute a dissipation of marital assets."³⁴

The court also rejected his "prior pattern" argument in the husband's prior transfers of $10,000 per year to the children for educational and savings purposes. Finally, the court concluded that the transfers were primarily for the husband's benefit because they relieved him of educational funding burdens and deprived the wife of the opportunity to include these sums in the property division.

An unusual dissipation case involved a government pension. In IRMO Moore,³⁵ the trial court ordered the husband to elect the survivor annuity for the benefit of the wife. The decision was upheld on appeal because the annuity was a marital asset and without the order it could have been lost or given to another person by the husband. This conduct would have constituted dissipation of the marital asset.

In IRMO Isaacs,³⁶ the husband alleged that the wife's creation of an ESOP for a closely held corporation, coupled with an employee contract guaranteeing her employment ; both done at a time when the marriage was undergoing an irreconcilable breakdown; constituted dissipation. The trial court disagreed, finding that the wife had entered into the agreements in good faith and for legitimate business reasons. Although the agreements may have had the effect of reducing the value of the business, they did not amount to dissipation, the court found.

Photographs were the subject of a dissipation claim in IRMO Ferkel.³⁷ The wife admitted that she had destroyed marital photographs. Although the wife tried to minimize the issue, the appellate court would not condone the hiding or destruction of any marital assets or property. The fact that the trial court could not put a monetary value on the photos should not have prevented it from granting some relief, the appellate court opined. The trial court should have ordered restoration of the marital property (particularly if the wife still had the negatives) or awarded him nominal damages.

A classic case of dissipation is found in IRMO Charles,³⁸ though the trial court did not address the issue of dissipation. The wife claimed on appeal that the evidence showed that the husband had spent over $116,000 on his mistress. He had also purchased and furnished a house for her, their child, and himself after he and his wife separated.

The wife also claimed that the husband liquidated in excess of $210,000 in investments. The husband also failed to satisfy income tax obligations, requiring the expenditure of marital funds for interest and penalties. In light of the prima facie case of dissipation, the appellate court held that the husband should have been required to meet his burden of showing how the money was spent. The case was reversed for reconsideration of the marital division in light of the dissipation.

A recent case involving an unusual claim of dissipation is IRMO Cerven.³⁹ At trial, the wife was found to have dissipated by tithing money to the Mormon Church after the breakdown of the marriage and after the husband had objected to the tithing. The appellate court upheld that finding in the amount of $7,397.34 and rejected the wife's claims that tithing represented her protected exercise of religion and had been assented to by the husband during the marriage.

VIII. Conclusion

This article is a review of the statutory and case law governing dissipation claims in Illinois. For practice pointers, please refer to the accompanying sidebars.

1.   In re Marriage of O'Neill, 138 Ill 2d 487, 563 NE2d 494, 498-99 (1990).

2.   75 Ill App 3d 96, 100, 393 NE2d 1065, 1067 (5th D 1979).

3.   90 Ill App 3d 674, 676-77, 413 NE2d 486, 489 (2d D 1980).

4.   306 Ill App 3d 656, 664, 714 NE2d 1092, 1097 (2d D 1999).

5.   68 Ill App 3d 513, 386 NE2d 517 (1st D 1979).

6.    386 NE2d at 521.

7.   97 Ill App 3d 838, 841, 424 NE2d 45, 48 (4th D 1981).

8.   158 Ill App 3d 545, 556, 511 NE2d 676, 684 (1st D 1987).

9.   176 Ill App 3d 721, 728, 531 NE2d 810, 815 (1st D 1988).

10.   100 Ill App 3d 452, 462, 426 NE2d 1087, 1094 (1st D 1981).

11.   149 Ill App 3d 23, 500 NE2d 612 (1st D 1986).

12. Id, 500 NE2d at 618.

13.   185 Ill App 3d 566, 541 NE2d 828 (4th D1989).

14.   Id, 541 NE2d at 830.

15.   In IRMO Harding, 189 Ill App 3d 663, 545 NE2d 459 (1st D 1989), the appellate court distinguished the O'Neill rationale in reversing a finding of dissipation by the wife of receipts from the husband's medical practice, writing as follows: "Because we have determined that no evidence exists which suggests that petitioner used the funds for an inappropriate purpose, we need not base our decision solely on the presence of an irreconcilable breakdown. Accordingly, we are not constrained to rule according to the O'Neill decision." Id, 545 NE2d at 467. Based on this language, the appeals court reversed the trial court finding that the wife had dissipated $253,756.55 from her bank accounts.
      In IRMO Getautas, 189 Ill App 3d 148, 154, 544 NE2d 1284, 1288 (2d D 1989), the appellate court upheld the trial court finding that the date of the irreconcilable breakdown of the marriage was the date of the filing of the petition for dissolution, even though the marriage was troubled and there had been numerous separations and reconciliations. The court called into question the ramifications of the O'Neill decision, including the costs of litigation, potential malpractice, judicial economy, the effect on marriages of documenting each and every purchase, and the potential role of courts as accountants and "auditing agencies" for every economic decision in a marriage. This court respectfully declined to follow the O'Neill opinion, and the battle lines were drawn.

16.   563 NE2d 494.

17.   Id, 563 NE2d at 498-99.

18.   219 Ill App 3d 920, 921, 579 NE2d 1265, 1266 (5th D 1991).

19.   317 Ill App 3d 546, 552, 740 NE2d 82, 86 (4th D 2000).

20.   110 Ill App 3d 864, 441 NE2d 1283 (2d D 1982).

21.    Id, 441 NE2d at 1288.

22.   128 Ill App 3d 1017, 471 NE2d 1008 (2d D 1984).

23.   Id, 471 NE2d at 1013.

24.   234 Ill App 3d 178, 197-98, 600 NE2d 437, 450-51 (2d D 1992).

25.   304 Ill App 3d 1019, 1026, 711 NE2d 339, 344 (1st D 1999).

26.   114 Ill App 3d 47, 51, 448 NE2d 545, 548 (1st D 1983).

27.   117 Ill App 3d 313, 317, 453 NE2d 866, 869 (1st D 1983).

28.   117 Ill App 3d 844, 853, 453 NE2d 1357, 1364 (1st D 1983).

29.   123 Ill App 3d 710, 719-20, 463 NE2d 773, 781 (1st D 1984).

30.   239 Ill App 3d 992, 995, 608 NE2d 585, 587 (3d D 1993).

31.   228 Ill App 3d 820, 593 NE2d 747 (1st D 1992).

32.   Id, 593 NE2d at 751.

33.   246 Ill App 3d 628, 615 NE2d 1314 (4th D 1993).

34.   Id, 615 NE2d at 1319.

35.   251 Ill App 3d 41, 44, 621 NE2d 239, 241 (3d D 1993).

36.   260 Ill App 3d 423, 430, 632 NE2d 228, 234 (1st D 1994).

37.   260 Ill App 3d 33, 39, 632 NE2d 1133, 1138 (5th D 1994).

38.   284 Ill App 3d 339, 344, 672 NE2d 57, 61 (4th D 1996).

39.   317 Ill App 3d 895, 899-900, 742 NE2d 343, 347 (2d D 2000).

Tips for representing the spouse claiming dissipation

1. Plead dissipation as soon as you become aware of it.

2. If the stakes are high enough, hire a forensic accountant to work with you on the preparation and trial of the case.

3. Conduct discovery tailored to your allegation (i.e., get bank statements, cancelled checks, credit card receipts, account statements, etc.).

4. Use spreadsheet software to conduct a cash flow analysis and thus determine the difference between the money available and money spent.

5. Conduct yet more discovery, including depositions, to lock other party into a position on dissipation.

6. Use a "request to admit facts" to reduce issues on particular dissipation claims.

7. Prove up your prima facie case;

• Ascertain the date or period of the irreconcilable breakdown of the marriage.

• Establish which marital assets were used in the dissipation.

• Show how the dissipater used marital assets for his or her sole benefit or a purpose unrelated to the marriage, if you know. If you don't know how the assets were used, prove at least that they were used and aren't accounted for.

• Establish what type of dissipation is being claimed (affirmative act, failure to protect, destruction of property, etc.).

8. Advise the court on how the opposing part should compensate for the dissipation (cash, assets, consideration in division of property, etc.). Consider what is actually available for that purpose.

Tips for representing the party accused of dissipation

1. Ask your client questions in the initial interview designed to flush out potential dissipation issues.

2. Have your client document every transaction during the pendency of the case.

3. Gather as much information as possible to document possible defenses.

4. Consider negotiating a settlement to minimize the impact an adverse finding on dissipation could have on your client's credibility and the judge's receptiveness re: other issues in the case.

5. Mount the following defenses where appropriate;

• Dispute the date of breakdown (the more recent the breakdown, the shorter the dissipation period).

• Prove acquiescence by the complaining spouse to your client's conduct before and after the breakdown.

• Show that the spending was an extension of the pre-breakdown standard of living.

• Prove that your client's conduct was not purposeful or intentional.

• Document and account for every penny your client is accused of dissipating.

• Show that the subject matter of the alleged dissipation was nonmarital and would not affect the overall property division.

6. Present the court with the remedy that is easiest for your client to live with in case you lose.

7. Keep in mind that if the amount is worth fighting over, it might be worth appealing.

Richard W. Zuckerman <rwzuckermanesq@insightbb.com> is a Peoria solo practitioner concentrating in family law and related fields. He is a member of the ISBA Board of Governors and vice-president of the Board of Managers of the Illinois Chapter of the American Academy of Matrimonial Lawyers. He received his B.S. from Bradley University in 1973 and his J.D. from The John Marshall Law School in 1976.