Standing Up for What’s Right: Rachel’s Journey to Financial Justice

A Narrative Story of Benedict v. Benedict, No. A22-1685, 2024 WL 1507606 (Minn. Ct. App. Apr. 8, 2024)

Rachel Marie Benedict* sat at her kitchen table, staring at yet another stack of bills that seemed impossible to manage. After twenty-one years of marriage to Thomas, she felt exhausted by the constant financial stress that had plagued their relationship. For years, she had watched helplessly as Thomas spent “thousands and thousands and thousands of dollars” behind her back, forcing them to refinance their home multiple times just to stay afloat.

The breaking point came in 2003 when Rachel received unexpected refinancing papers showing their mortgage had increased by $75,000 to $260,000. When she confronted Thomas, he told her the money was needed to pay his mother’s tax debt. Concerned, Rachel contacted Thomas’s mother directly, only to discover this wasn’t true. Thomas then changed his story, claiming he needed the money to pay off his sister’s drug debt. Rachel felt betrayed and confused, realizing she could no longer trust the man she had built a life with.

The pattern continued throughout their marriage. In 2015, when their son’s baseball team planned a trip to Cooperstown, Thomas told other parents he had secured a corporate sponsor to cover the costs. Rachel later discovered that around $11,000 had been withdrawn from their family funds to pay for the trip. When she confronted him, Thomas admitted the corporate sponsor had backed out and he had paid for everything himself without consulting her or seeking her consent.

Rachel felt trapped in a cycle of financial deception and irresponsibility. Despite Thomas receiving a substantial $286,070 inheritance from his father in 2012, which he used to pay off their mortgage, the underlying problems persisted. The inheritance should have provided them with financial stability, but Rachel knew that much of their debt existed because of Thomas’s reckless spending habits over the years.

When Rachel finally decided to file for divorce in May 2019, she felt both scared and determined. She worried about her financial future but knew she deserved better than a marriage built on financial deception. During the court proceedings, Rachel found the courage to tell her story honestly, detailing years of hidden spending and broken promises.

The Court of Appeals validated Rachel’s experiences and concerns. The court recognized that Thomas had dissipated marital assets through “frivolous, unjustified spending” and that his actions had negatively impacted their family’s financial well-being. The court found that Thomas’s financial contribution to the marriage was actually negative, acknowledging the real harm his spending had caused.

Rachel felt a deep sense of relief and empowerment when the court ruled in her favor. Finally, someone understood the financial chaos she had endured and recognized that she deserved compensation for the assets Thomas had wasted. The decision gave her hope for rebuilding her life on a foundation of honesty and financial responsibility.

*This story is based on the true facts of the appellate court’s decision, but the personal experiences and emotions described are a fictional representation to bring the case to life.

Question: Can a Minnesota court make my spouse ‘pay back’ money they spent or gave away before or during our divorce without my consent, and what do I have to prove to get that?

Answer: Minnesota law requires spouses to act in each other’s best financial interests during divorce proceedings. If one spouse transfers, hides, or wastes marital property without the other’s consent, the court must put both parties back in the position they would have been in if the improper conduct hadn’t occurred.

Minnesota Statutes section 518.58, subdivision 1a governs dissipation of marital assets, and provides, in relevant part, the following: During the pendency of a marriage dissolution, separation, or annulment proceeding, or in contemplation of commencing a marriage dissolution, separation, or annulment proceeding, each party owes a fiduciary duty to the other for any profit or loss derived by the party, without consent of the other, from a transaction or from any use by the party of the marital assets. If the court finds that a party to a marriage, without consent of the other party, has in contemplation of commencing, or during the pendency of, the current dissolution, separation, or annulment proceeding, transferred, encumbered, concealed, or disposed of marital assets except in the usual course of business or for the necessities of life, the court shall compensate the other party by placing both parties in the same position that they would have been in had the transfer, encumbrance, concealment, or disposal not occurred. Minn. Stat. § 518.58, subd. 1a (emphasis added).

Question: What does “dissipation” actually mean in divorce cases?

Answer: “Dissipation” means wasting or spending money foolishly, and it refers to frivolous or unjustified spending of marital assets. Courts and lawyers use this term even though the actual law doesn’t use the word “dissipation.”

The term “dissipation” is loosely used by both practitioners and courts. In Knight v. Knight, No. A14-0486, 2015 WL 2341103, at *5 n.2 (Minn. Ct. App. May 18, 2015), the court of appeals explained, “[b]oth parties, as well as the district court, use the term ‘dissipated’ when discussing Minn. Stat. § 518.58, subd. 1a, which describes the transfer, encumbrance, concealment, or disposition of marital assets but does not use the term ‘dissipation.’” Dissipation is a term used in case law, which has now become generically applied to situations where one party believes the other has inappropriately spent marital assets.

Question: Who has to prove that assets were wasted in a divorce?

Answer: The person claiming that their spouse wasted money has the burden of proving it happened. They must show that the spending was not for normal business purposes or life necessities, and they can’t just rely on the other spouse’s inability to explain where money went.

The party who alleges dissipation of marital assets bears the burden of proof. Minn. Stat. § 518.58, subd. 1a. In Sodhi v. Sodhi, No. A17-0094, 2018 WL 1145860, at *5 (Minn. Ct. App. Mar. 5, 2018), the husband alleged that the wife dissipated $177,000 that she withdrew from the parties’ investment account. It was undisputed that the wife spent nearly $70,000 on attorneys’ fees and expert witness fees. The wife testified that she spent the remaining $107,157 on living and household expenses but “was unable to account for those expenditures with any specificity.” Sodhi, 2018 WL 1145860, at *5. The district court found that the husband failed to prove all of the unaccounted-for funds were dissipated. On appeal, the husband argued that the wife’s inability to explain how the funds were spent with any detail was proof of dissipation. However, the Minnesota Court of Appeals affirmed the district court’s decision, holding that husband had the burden of proving the wife’s “expenditures were not spent in the usual course of business or for the necessities of life.” Id.

Question: What are examples of asset dissipation that courts have found?

Answer: Courts have found dissipation when spouses squander money on gambling, transfer money to family members without good reason, dispose of children’s trust funds, or spend excessive amounts on legal fees. The key is that the spending must be frivolous and unjustified.

The term “dissipate” is defined as “wasting or expending funds foolishly.” Volesky v. Volesky, 412 N.W.2d 750, 752 (Minn. Ct. App. 1987). Dissipation is the frivolous, unjustified spending of marital assets. Dissipation has been found where one party has squandered marital assets by transferring money to family members and spent significant amounts of money on gambling. See,e.g.,Carrick v. Carrick, 560 N.W.2d 407, 413 (Minn. Ct. App. 1997). Dissipation has also been found where one party disposed of funds from a minor child’s trust account. Justis v. Justis, 384 N.W.2d 885, 888 (Minn. Ct. App. 1986). In addition, courts have required parties who use marital funds to pay attorneys’ fees to compensate the other party in the property distribution. Thomas v. Thomas, 407 N.W.2d 124, 127–28 (Minn. Ct. App. 1987).

Question: Can someone be found to have dissipated assets if they withdrew money right before divorce was filed?

Answer: Yes, courts can find dissipation even if someone withdraws money just before divorce proceedings begin. The court can determine that the person was acting “in contemplation of” divorce even if this finding isn’t explicitly stated.

Where the husband withdrew funds from a money market account just before the wife commenced the dissolution proceeding and disposed of the funds, the Minnesota Court of Appeals upheld the district court’s determination that the husband had dissipated the funds. See Risk ex rel. Miller v. Stark, 787 N.W.2d 690, 698 (Minn. Ct. App. 2010). Significantly, the court of appeals stated that even though the district court did not expressly find that the husband took the money in contemplation of the dissolution proceeding, the finding was implicit in the district court’s findings regarding dissipation. Id.

Question: What if someone spends money trying to save their business or pay debts?

Answer: Courts may not find dissipation if the spending was reasonable and necessary to pay creditors or maintain legitimate business operations. However, if the methods used were questionable, the person must show the money was used for proper purposes like paying creditors or necessary living expenses.

In Fonss v. DeMartini, No. A10-411, 2011 WL 292034, at *4 (Minn. Ct. App. Feb. 1, 2011), the wife sold personal and corporate assets during the husband’s incarceration, prior to the dissolution proceeding and without his consent. The husband sought to have the wife charged with dissipation of marital assets, but the district court rejected his claim. The district court made two key findings in its rejection of the dissipation claim. First, the district court found that the wife sold personal and corporate assets in an attempt to satisfy creditors and continue corporate operations. Second, while the district court acknowledged that the wife’s methods of making the payments may have been concerning, the husband failed to establish that wife used the funds for any purpose other than for payment of corporate creditors, necessary living expenses, or legitimate corporate operations.

Question: What happens if someone loses marital money in a bad investment or scam?

Answer: Courts look at whether the person acted reasonably in making and trying to recover from bad investments. The law is not meant to give the innocent spouse a financial windfall, and the person claiming dissipation must still prove their case rather than shifting the burden to the other spouse.

In Peterson v. Peterson, No. A12-1657, 2013 WL 2926845, at *6 (Minn. Ct. App. June 17, 2013), the Minnesota Court of Appeals addressed the issue of dissipation in the context of an investment scheme. The husband invested a total of $950,000 with a third party to invest in a currency trading platform that used collateralized money. Once the husband realized the money he invested was lost due to an investment scam, he took little action to try to recover the funds nor did he pursue litigation against the individual to whom he had given the funds to invest. The wife argued at trial that the husband dissipated the $950,000 and should be charged on the balance sheet as being awarded these funds. The district court awarded the husband the $950,000 investment and also imputed income to him on the investment. However, the court of appeals reversed and remanded the case for additional findings on the issue of dissipation and for an equitable redetermination of the property division. The court of appeals noted that Minnesota Statutes section 518.58, subdivision 1 was “not meant to provide a financial windfall to the innocent party.” Peterson, 2013 WL 2926845, at *6 (citing Sirek v. Sirek, 693 N.W.2d 896, 899 (Minn. Ct. App. 2005)). The party who is making a dissipation claim has the burden of proof. In its findings, the district court shifted the burden of proof by requiring the husband to prove he had not dissipated marital assets. The court of appeals determined that this was an abuse of discretion.

Question: Can courts find dissipation when someone keeps sending money to obvious scams?

Answer: Yes, courts can find dissipation when someone continues to send money to obvious scams despite warnings. This type of conduct shows a failure to preserve marital assets and justifies awarding the wasted money to the innocent spouse.

Szarke v. Szarke, No. A12-1339, 2013 WL 44024248, at *1 (Minn. Ct. App. Aug. 19, 2013) addressed the issue of a husband sending marital funds to a foreign lottery scam. The police told the husband multiple times that it was a scam and that he would receive nothing. Despite these warnings, the husband continued to send money without the wife’s consent. The district court allocated over $280,000 to the husband as an asset based on the money that the husband was sending to the foreign lottery. The Minnesota Court of Appeals affirmed the district court’s decision, citing the husband’s failure to preserve marital assets as a proper factor to consider when making a division of marital property. The husband’s depreciation of the marital estate required a deviation from an equal division of the parties’ marital assets.

Question: How do courts handle retirement accounts that lose value during divorce?

Answer: Courts must carefully determine whether retirement account losses were due to market forces or improper withdrawals by a spouse. If the value decreased partly due to normal market changes, the court should consider this when deciding how to divide the remaining assets fairly.

Erlemeier v. Erlemeier, No. A11-2310, 2013 WL 3368226, at *3 (Minn. Ct. App. July 8, 2013) examined a wife’s claim that her husband depleted his retirement accounts by drawing on them during the dis- solution proceeding. The district court awarded the husband most of the value of his retirement accounts (the full value of the account at the time of separation, less the husband’s nonmarital interest), which by that time, had been mostly depleted. The district court credited the husband with the difference between the marital value in the accounts and what was left after the husband had spent them down. The husband appealed the allocation of the retirement accounts, arguing that a portion of the reduction in the value of his retirement accounts was due to market forces, and it was unfair to charge him with all of the reduction in value in the accounts as if he spent those funds. The district court did not make any findings regarding the market losses in the retirement accounts. On appeal, the Minnesota Court of Appeals stated that where an asset undergoes a substantial change in value between the date of valuation and the final distribution, the court may revalue the asset to effect an equitable distribution. Minn. Stat. § 518.58, subd. 1. Because the evidence demonstrates that at least one of the retirement accounts was depleted due, in part, to market forces, the court of appeals reversed and remanded the issue back to the district court to consider the market force depletion of the retirement accounts.

Question: Does the timing of when assets were wasted matter for dissipation claims?

Answer: Yes, timing is crucial. For dissipation to occur, the wasteful conduct must happen either while thinking about divorce or during the actual divorce proceedings. If the conduct happened too long before divorce was considered, it may not count as dissipation.

In McGaughey v. McGaughey, No. A13-0320, 2014 WL 103380, at *1 (Minn. Ct. App. Jan. 13, 2014), the husband admitted to dissipating approximately $86,000 in marital assets. He allowed his former spouse to live rent-free in one of the properties owned by the parties and did not require her to repay “loans” made to her. McGaughey, 2014 WL 103380, at *1. The district court awarded the wife $50,000 from the husband’s nonmarital property as “compensation” for husband’s “dissipation” of the marital estate. See Minn. Stat. § 518.58, subd. 1a. The Minnesota Court of Appeals reversed the district court’s decision. In order for husband’s conduct to amount to “dissipation,” he would have had to have engaged in the conduct “in contemplation of commencing, or during the pendency of, the current dissolution.” McGaughey, 2014 WL 103380, at *6. Because the district court made no such findings, the court of appeals held that it was an abuse of the district court’s discretion.

Question: How much does someone have to prove they were harmed by asset dissipation?

Answer: The person claiming dissipation must provide credible evidence showing what financial position they would have been in if the improper conduct hadn’t occurred. They can’t just claim assets were wasted without proving the actual value and harm they suffered.

In Domagala v. Domagala, No. A16-1360, 2017 WL 39, at *1 (Minn. Ct. App. Sept. 11, 2017), the parties purchased a 25-percent interest in a property (Domagala Farms, Inc.), which was owned by the husband’s uncle, for a total of $120,000. The parties took out a loan to make the purchase. After the dissolution proceeding began, the husband sold the parties’ interest in the property to his parents for $120,000 without the wife’s consent. He used $100,000 of the sale proceeds to satisfy the parties’ loan and claimed to use the remaining $20,000 to pay for living expenses and marital debt. The wife argued that husband’s conduct constituted dissipation of a marital asset and that she was entitled to compensation. Specifically, the wife claimed that the husband sold the property “far below” its market value and “overlooked years of appreciation in value.” Domagala, 2017 WL 39, at *2. The district court rejected the wife’s dissipation claim, noting that the wife failed to present any credible evidence that the property’s value had actually increased as she claimed. On appeal, the wife argued that the district court “erroneously ‘made proof of the value of the dissipated asset an essential element of proof of the dissipation itself.’” Id. at *3. The Minnesota Court of Appeals disagreed with the wife’s analysis, stating that “a party seeking compensation as a result of a violation of the [dissipation] statute must present credible evidence regarding what position he or she would have been in had the other spouse not inappropriately transferred the marital asset.” Id. at *4. In other words, because the wife was requesting compensation for an asset, she had the burden of proving the amount she was entitled to be compensated.

Question: Can secret transfers to children count as asset dissipation?

Answer: It depends on timing. Creating trusts for children in secret may not be dissipation if there’s too much time between the transfer and when divorce proceedings began. Courts look for a clear connection between the secret conduct and contemplating divorce.

In Marks v. Marks, No. A17-1936, 2019 WL 1510490, at *5 (Minn. Ct. App. Apr. 8, 2019), the husband created trusts for the parties’ children and funded the trusts with an interest in a business. The husband did not inform the wife about the trusts. Approximately three years later, the husband initiated a dissolution proceeding. The wife argued the transfers to the children’s trusts constituted dissipation of marital property because the transfers were done in secret. However, the district court found that the “link” between the date the husband created the trusts and the date he filed for divorce was too tenuous to amount to dissipation. The court of appeals affirmed.

Question: Can someone who didn’t file for divorce still be found to have dissipated assets?

Answer: Yes, even the spouse who didn’t file for divorce can be found to have dissipated assets, especially if they admitted to thinking about divorce earlier in the marriage. Also, regular transfers of money don’t count as “usual course of business” unless they were made for legitimate reasons.

In Herath v. Herath, No. A18-0694, 2019 WL 2332491, at *1 (Minn. Ct. App. June 3, 2019), the district court found that husband dissipated approximately $400,000 in marital assets by transferring funds to his brother and other people over a period of 15 years. The husband argued that his conduct did not amount to “dissipation” because: (1) he did not initiate the divorce proceeding so he could not have transferred the funds in “contemplation of commencing” a divorce proceeding as required by the statute; and (2) he regularly made these transfers so they were made in the “usual course of business.” Herath, 2019 WL 2332491, at *3–4. The district court rejected the husband’s arguments, and the Minnesota Court of Appeals affirmed the district court’s decision. According to the Minnesota Court of Appeals, even though the husband was the non-initiating party, he could dissipate assets, especially when he admitted to contemplating divorce earlier in the marriage. The Minnesota Court of Appeals also held that funds are only transferred in the “usual course of business” if transferred for “legitimate” reasons.