One of the biggest concerns parties have when going through a divorce is that their spouse will dissipate, hide, or move assets without their knowledge and consent. The fear is that once assets are gone, they can no longer be divided in the divorce. While the dissipation, hiding, or moving of assets is unfortunately not uncommon during a divorce, there are three main protections available to protect assets during a divorce: (1) Rule 411 Automatic Restraining Order; (2) Trustee Process; and (3) ultimate property division. A summary of each of these protections is as follows:
- Rule 411 Automatic Restraining Order
In addition to prohibiting a divorcing party from incurring debt which would burden the credit of the other party and from changing the beneficiary of any insurance policy or retirement plan, the Supplemental Probate and Family Court Rule 411: Automatic Restraining Order prevents both spouses from taking actions which would affect marital property without the other spouse’s consent. It provides that neither party to a divorce “shall sell, transfer, encumber, conceal, assign, remove or in any way dispose of any property, real or personal, belonging to or acquired by, either party.”
The Rule 411 Automatic Restraining Order becomes effective as to the Plaintiff upon the filing of the Complaint about Divorce and as to the Defendant to a divorce action upon service of the Summons and Complaint about Divorce or acceptance of service by the Defendant. If a spouse is concerned that the other party will take any of the actions prohibited by the Rule 411 Automatic Restraining Order, it is important to serve the other party with the Complaint for Divorce and Summons as soon as possible so that the order becomes effective.
The one caveat to the prohibition of selling, transferring, or disposing of an asset during a divorce is that either spouse may do so to pay reasonable expenses of living, in the ordinary and usual course of business or investing, or for the payment of reasonable attorneys’ fees and costs in connection with the divorce. If the spouse who sold, transferred, or disposed of an asset did so for one of these reasons, they will likely not be deemed to have violated the Rule 411 Automatic Restraining Order.
Once in place, the Rule 411 Automatic Restraining Order acts as any other enforceable order, meaning that if a spouse violates it by selling, transferring or disposing of an asset without Court Order or the other spouse’s consent, the harmed spouse can file a Complaint for Contempt seeking to enforce the Automatic Restraining Order and for other relief, including a request for attorneys’ fees. The Rule 411 Automatic Restraining Order remains in place during the pendency of the divorce and can only be amended by agreement by the parties. It is automatically vacated upon the entry of a Judgment of Divorce.
- Trustee Process
Domestic Relations Procedure Rule 4:2 Trustee Process provides another layer of protection for a spouse going through a divorce when there are serious concerns that the other spouse may transfer, sell or dispose of assets to which the non-moving spouse would otherwise be entitled upon divorce. If a Motion for Trustee Process is allowed, the asset in question is attached and held by a third party, the “Trustee,” for safekeeping. The Trustee may not release the asset or funds until an order judgment is entered dissolving the attachment on the asset.
An order approving trustee process for a specific amount may be entered by the Court ex parte (meaning without providing the spouse who is alleged to be moving assets from being heard) upon findings by the Court that there is a reasonable likelihood that the plaintiff will recover a judgment in an amount equal to or greater than the amount of the trustee process. The findings must also support that either (1) there is a clear danger that if notified in advance of the attachment on trustee process will withdraw the funds or goods from the possession of the trustee and remove them from the state or conceal them, or (2) there is an immediate danger that the defendant will dissipate, damage or destroy the asset to be attached on trustee process.
- Upon Ultimate Property Division
The final protection afforded divorcing spouses is upon ultimate property division. One of the factors a court considers when assigning property between divorcing spouses is each spouse’s contribution to the acquisition, preservation, and appreciation in the value of their respective estates. See M.G.H. Chapter 208, section 34 for a full list of factors the Court considers when dividing an estate. The Court may consider one spouse’s inappropriate or wasteful spending during the pendency of divorce as a dissipation of an asset, rather than preservation, for which the other spouse may be entitled a credit.
Not every large expenditure constitutes a dissipation of a marital asset. The Court will generally look to the totality of the circumstances, the amount in dispute, and whether the asset was actually wasted or misused. Significant spending on gambling or on a paramour, hiding assets, or transferring assets to someone else without sufficient consideration, generally raises to the level of sufficient financial misconduct which would allow the Court to make an assignment of assets at the time of the divorce to in a way which addresses the other spouse’s dissipation of the marital asset.
While there is no iron-clad way to prevent a spouse from transferring, selling, or dissipating assets in their control prior to or during a divorce, the above protections should provide a divorcing spouse with some assurance that the marital estate will be secure and their spouse’s wrongful financial misconduct will not go unnoticed.