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Posted on May 18, 2023

Bad Investments In An Illinois Divorce

A fool and his money are soon parted. This partition often happens before an Illinois divorce.

Whether the investment was crypto, stock market day trading or other forms of essentially legalized gambling, big losses mean big problems in a relationship. As my mother liked to say “When poverty walks in the door….loves goes out the window.”

When one spouse realizes that the other spouse’s hare-brained scheme has depleted their savings, they quickly file for divorce. After filing for divorce, the more level-headed spouse will wonder if they can get any of the money back.

Of course people rarely ever lose just some of their money. They usually lose all of the money. Other marital assets, however, will hopefully still exist beyond the depleted funds lost to the bad investment.

The remaining assets (a house, a 401(k), jewelry) can still be divided in an Illinois divorce. Perhaps, these remaining assets can allocated to the spouse that did not  fritter away the other marital assets in a bad investment.

An Illinois divorce court “shall 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 property” 750 ILCS 5/503(d)(2)

“[T]he term “dissipation,” as used in section 503(d)(1) of the Illinois Marriage and Dissolution of Marriage Act, refers to the “use of marital property for the sole benefit of one of the spouses for a purpose unrelated to the marriage at a time that the marriage is undergoing an irreconcilable breakdown.” In re Marriage of O’Neill, 563 NE 2d 494 – Ill: Supreme Court 1990

It does not matter if the spouse who made the bad investment did not profit from the investment. It does not matter if the spouse who made the bad investment did not even enjoy the roller coaster ride of the rise and fall of the investment’s value.

“A spouse may dissipate marital assets even though he or she derives no personal benefit from the dissipation.” In re Marriage of Thomas, 608 NE 2d 585 – Ill: Appellate Court, 3rd Dist. 1993

Is a bad investment a dissipation which would allow the other spouse a greater share of the marital estate?

[W]hether a given course of conduct constitutes dissipation depends upon the facts of the particular case.” In re Marriage of Carter, 740 NE 2d 82 – Ill: Appellate Court, 4th Dist. 2000

After an accusation (a formal notice) of dissipation is made the spouse accusing dissipation must merely make a prima facie showing of dissipation.

Prima facie means “sufficient to establish a fact or raise a presumption unless disproved or rebutted.” Black’s Law Dictionary (11th ed. 2019)

The prima facie showing for dissipation from a bad investment is incredibly easy. Just show the judge the money in a brokerage account in the past and then show the judge the current balance. After that, the other spouse must explain why the losses were for a marital purpose.

“The spouse charged with dissipation of marital funds has the burden of showing, by clear and specific evidence, how the marital funds were spent.” In re Marriage of Carter, 740 NE 2d 82 – Ill: Appellate Court, 4th Dist. 2000

It does not matter if the crazy investor spouse had the best of intentions and truly believed they would double the family’s money.

“We acknowledge that there is a spectrum of risky conduct by a spouse and that courts may arrive at different estimations of whether the conduct is merely a combination of good faith and bad luck or clear dissipation. However, the dissipating spouse’s intent is not dispositive in this determination. For instance, gambling with marital funds historically has been treated as dissipation, despite the fact that gamblers no doubt go to the racetrack or the casino intending to win.” In re Marriage of Schneeweis, 55 NE 3d 1280 – Ill: Appellate Court, 2nd Dist. 2016

In re Marriage of Schneeweis describes Andrew Schneeweis as a spouse who “commenced a course of speculative, high-risk investing without the necessary acumen and experience.” The court further found that Andrew dissipated marital assets, “in that he caused or allowed the devaluation of the marital estate through his unwise trading practices and his incurring of significant debt without Laurie[ his spouse’s] knowledge.” In re Marriage of Schneeweis, 55 NE 3d 1280 – Ill: Appellate Court, 2nd Dist. 2016

“Andrew’s self-serving statements about his intentions are not the only evidence of the “purpose” of his conduct. The record contains ample evidence that Andrew, the acknowledged sole financial provider for his family, was aware of the devastating effect that his conduct could have on his family, yet he deliberately chose to increase the risk to them — quitting his high-paying job, incurring debt without telling Laurie, and ultimately appropriating essentially all of the family’s savings in order to fund his need for increasing amounts of assets to secure his mounting trading debt. This conduct does not show good faith by Andrew, it shows extreme recklessness — indeed, gambling — by someone who no longer valued his family’s financial security. The trial court did not err in finding that this course of conduct was not “related to the marriage.”” In re Marriage of Schneeweis, 55 NE 3d 1280 – Ill: Appellate Court, 2nd Dist. 2016

The real limit on a bad investments as a dissipation in an Illinois divorce is whether the investment occurred after the irreconcilable breakdown of the marriage.

“Dissipation is defined as the use of marital property for one spouse’s sole benefit for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown.” In re Marriage of Tietz, 605 NE 2d 670 – Ill: Appellate Court, 4th Dist. 1992 (emphasis mine)

“[D]issipation is to be calculated from the time the parties’ marriage begins to undergo an irreconcilable breakdown, not from a date after which it is irreconcilably broken.” In Re Marriage of Holthaus, 387 Ill. App. 3d at 375

So, if the non-investing spouse was happily enjoying the run-up of the investment they shouldn’t be complaining when the investment collapses…or should they? If the investment collapse coincides with the beginning of the irreconcilable breakdown wouldn’t the dissipation still apply?

“Since the investments were not made in contemplation of dissolution, the acts of husband do not constitute dissipation of marital assets within the meaning of the [Illinois Marriage and Dissolution of Marriage Act].” In re Marriage of Drummond, 509 NE 2d 707 – Ill: Appellate Court, 4th Dist. 1987

Every dissipation case is determined by its own facts. A bad investment’s characterization as dissipation will be determined by the description of the investment by the divorce attorneys. One divorce attorney will describe the investment result as hapless bad luck while the other divorce attorney will describe the investment as a perfidious waste from the very start.

Divorce judges are not sophisticated investors. Divorce judges are sophisticated argument interpreters. Divorce judges will be swayed by the poetry of a divorce lawyer’s argument.

“How did you go bankrupt?”
Two ways. Gradually, then suddenly.” – Ernest Hemingway, The Sun Also Rises

Make sure you hire an attorney who can make the right argument to accurately describe the investment…to benefit you. To schedule a meeting with an experienced Illinois divorce attorney contact my Chicago, Illinois family law firm today.

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Russell Knight

Russell D. Knight has been practicing family law as a Chicago divorce lawyer since 2006. Russell D. Knight amicably resolves tough cases while remaining a strong advocate for his client’s interests.

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