Waste of marital assets may affect the allocation of community property

Waste of community property may result in jointly owned community property not being divided evenly by an Arizona court upon a marital dissolution.

Since Arizona is a community property state, property acquired during a marriage is generally deemed to be jointly owned by both parties and, upon divorce, is to be divided evenly. Exceptions do exist. In dividing marital assets and debts, courts can give consideration to excessive or abnormal expenditures by one spouse that amount to squandering jointly held property. The squandering of assets by a spouse, which is referred to as waste, may mean that the spouse committing waste will be allocated less property upon a divorce.

In an article published in the Journal of the Academy of Matrimonial Attorneys, the author observes that the following expenditures by one spouse, without the permission of the other spouse, have been found to constitute community waste: (1) gambling; (2) a failure to make mortgage or tax payments resulting in a foreclosure; (3) alcohol- and drug-related expenses; and (4) expenses incurred in furthering extramarital affairs.

A good example of an Arizona case where waste was found is Gutierrez v. Gutierrez. There, the husband withdrew approximately $62,000 from the community retirement account without his wife's knowledge and was unable to explain how he had spent such a large sum of money. What was clear was that the expenditures were excessive, abnormal and did not benefit the community.

The Gazeley case

The recently decided case of Gazeley v. Larsen-Gazeley illustrates how the courts deal with claims of community waste. In Gazeley, a wife appealed from a marital dissolution decree and asserted that the trial court had improperly denied her claim for waste. The Arizona Court of Appeals emphasized that a spouse alleging community waste by the other spouse has the burden of showing evidence of waste after which the other spouse can present evidence in rebuttal.

At trial, the wife presented evidence in the form of a compilation of expenditures from a checking account, several credit cards and a PayPal account. The exhibit showed numerous transactions in a little less than two years totaling $92,559.04. The wife testified that the credit card charges were for places and restaurants she had never visited and for items she had never received. She suggested that, because her husband was having an affair during the time period in question, the monies were spent furthering the extramarital affair.

The husband denied community waste and testified that some of the expenditures in question were from taking clients to lunch, business travel, buying a present for his wife and his wife's Lasik surgery. He produced evidence that at least some of the charges were business expenses and that several of the checks in question were written to-and cashed by-his wife.

The court found no evidence of abnormal transactions. Further, the number of transactions did not, by itself, suggest that they were anything other than normal living expenditures. All in all, said the court, the wife's waste claims were highly speculative. Accordingly, the trial court did not err in concluding that the wife had failed to prove her claim of waste. Gazeley illustrates that, if a party charged with waste provides a reasonable explanation for expenditures, a trial court does not abuse its discretion in finding that no waste occurred.

Seeking legal help

If you are contemplating a divorce and believe that your spouse has squandered community property assets, you should contact an Arizona attorney experienced at handling divorce cases. The attorney can review the evidence and counsel you as to whether you may have a viable claim for community waste.

Keywords: community property, Arizona