Can My Spouse Spend Our Assets Pending the Divorce?

divorce assets and martial propertyYou have decided to get divorced.  You wisely hired an attorney and your fear is that pending the divorce your spouse will spend down the assets and/or get rid of marital property.  While the commencement of a matrimonial action serves to terminate the acquisition of marital property, it might be months or even years before the property is distributed.  Thankfully, Domestic Relations Law (“DRL”) §236 has contemplated this very real concern and has a remedy.

DRL §236 provides for “automatic orders.”  What does this mean?  It is an order restraining parties from dissipating marital assets pending the divorce.  By rule, automatic orders are filed with the summons with notice or summons and complaint.  The order goes into effect, from the plaintiff’s perspective, upon filing of the summons or the summons and complaint.   From the defendant’s perspective, the automatic orders take effect upon service.

What’s in the automatic orders? There are five statutory restraints: (1) neither party may sell, transfer encumber or dispose of any property without the written consent of the other party except in the usual course of business or to pay for the customary and usual household expenses; (2) neither party can transfer, encumber assign, withdraw or dispose of stocks, or other assets in an IRA or other pension plan without the written consent of the other party; (3) neither party may incur unreasonable  debts unless in the normal course of business or for household expenses; (4) neither party may remove the adverse party or any children from existing medical coverage; (5) neither party may change the beneficiaries of any existing life insurance policies and must keep all policies in effect pending the outcome of the divorce.

Essentially, these orders are in place so that neither spouse can spend assets without prior consent of the other party.  Further, assets can only be used in the normal course of business.  The “normal course of business” whether it is an actual business expense, or running a house hold, isn’t actually defined.  A court will need to take into account life styles, the asset used, the purpose and whether, considering all relevant factors, the expenditure was a violation of the order.

LEARNING POINT:  Once a divorce action is filed, automatic orders, which are filed contemporaneously with the action, will prevent either party from either wasting marital assets or incurring significant debt.  If you are in the middle of a divorce and you have not retained counsel, seek out an attorney immediately! They can advise how you can use the marital assets pending the divorce.

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