February 20, 2013

Risky Business | Bad Investments’ Affect on Property Division

Unfortunately, many divorces contain unsettling news when it comes to property division.  Poor decision making about finances can affect how the Courts divide a couple’s property in divorce proceedings.  However, one party losing marital funds during the marriage does not alone warrant an unequal property division.

Under 23 Pa.C.S.A. ß 3502(a) of the Divorce Code, equitable distribution is the process used by the court to divide the marital property. The court essentially uses a 3-step process in determining equitable distribution:

  1. It identifies the marital property.
  2. It values the marital property.
  3. It divides and distributes the marital property

There are 11 factors that are relevant to the equitable division of the parties’ property in Pennsylvania and a case in New Hampshire happens to shed interesting light on how the Courts may review a spouse’s poor investment decisions in determining the division of the couple’s property.

In Martel v. Martel (March, 2008) ,  the Wife filed for divorce after twenty years of marriage. During a five period of their marriage, the Husband lost over one million dollars as a result of stock trading.  The Court found “that [the respondent’s] actions in stock trading caused the loss of over $1,000,000.00 in family assets,” and, in part, based their unequal asset distribution upon this loss.

Husband appealed this decision to the New Hampshire Supreme Court arguing that the trial court unequally divided the marital assets in favor of the Wife.  The Supreme Court partially overturned the trial court’s decision holding that evidence indicated that the Wife was aware that the Husband was investing in the stock market and that he managed the account on a daily basis.  Furthermore, the Husband used his own money to make the initial deposits in the investment fund.

The Court explained that one party losing money during a marriage is not, in it of itself, a reason to determine an unequal property division.  The nature of the conduct of the spouse, knowledge of the conduct by the other spouse and the extent of the diminishment of the marital estate must be analyzed as well.

Therefore, an irresponsible spouse is not enough reason to be awarded a larger portion of a marital estate.

Navigating through a complicated divorce is a difficult process. You need advice of an experienced attorney! Contact the Law Offices of Michael Kuldiner, P.C. for a free consultation, call (215) 942-2100 or complete our quick contact form at top right and send to us your questions.