united-states divorce
Is losing a lot of money in day trading before divorce something that can be fought in court?
<p>Is losing a lot of money in day trading before divorce something that can be fought in court?  Husband had already moved out and lost a lot of money day trading but was not divorced at the time.  To be fair he did make money prior in day trading but then he lost most if not all of the money after he moved out and before the divorce.</p>
<p>Can this asset be retrieved in a court proceeding and say that he was squandering money?</p>

<p><strong>This is complicated. This is state dependent, and as of time of writing, you haven't disclosed what is the relevant state. This is something you should hire/retain a (divorce) lawyer, and discuss with them. The law can be messy; divorces are always messy.</strong></p>
<p>The answer is the most common answer in law: it depends, on specific facts. See above, get a lawyer.</p>
<p>The first question is &quot;is the money in this investment account a shared asset that I have any claim to&quot;. The answer is &quot;it depends&quot;. What state are you in, and where did this money come from? Depending on various factors, the answer might very well be &quot;no&quot;, in which case, this money (and it's loss) may not affect you at all.</p>
<p>If you do have some claim to this money, then it gets even more complicated.</p>
<p>&quot;Can this asset be retrieved in a court proceeding and say that he was squandering money?&quot; Maybe, kinda. Technically no (because of the way you phrased that). I'll explain. In a divorce, &quot;shared&quot; assets are divided equitably (Note &quot;equitably&quot; does NOT mean &quot;equally&quot;) based on numerous factors, often on a case-by-case basis, and which factors depend on the state. (Therefore, the lawyer you retain should be licensed in the state you/your husband are filing for divorce in).</p>
<p>Before your divorce, both sides have (in general) the right to use shared property. They do not have the right to intentionally damage or destroy said property. One complication/grey area is normal use that degrades or damages the value of said property. For example, imagine a classic sports car. Many people drive them for fun; this is normal use. On the other hand, using a classic sports car decreases the value. Is using the sports car unreasonable damage? This is a fact based determination to be made based on specifics.</p>
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<p>Can this asset be retrieved in a court proceeding [if I] say that he was squandering money? (correction to what I think think you meant).</p>
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<p>Maybe, but probably not. You can say whatever you want in court, but what matters is what you can <strong>prove</strong>, as you are the bearing the burden of proof due to making the accusation (and you must prove it to the standard required by the court in your case for your particular motion/accusation, which might be the standard of &quot;the balance of probabilities/more likely than not&quot; or &quot;clear and convincing evidence&quot;, or something else; it's complicated, fact dependent and state dependent, so get a lawyer).</p>
<p>You don't need to prove that he lost money. If he was day trading before, the fact that he was day trading after the separation is not held against him; day trading is risky, therefore you have to prove that he intentionally lost money (and, potentially, that he intentionally lost money to deny money to you in the divorce, as opposed to e.g. tax loss harvesting). I would recommend hiring a divorce lawyer and discussing it with them.</p>

<p>Most states in a divorce utilize &quot;community property&quot;, or a separate property regime in which a court is to equitably divide all property, or all marital property.</p>
<p>In a community property state, if the property squandered in day trading is separate property of the spouse who did so, there is no effect in the divorce, but if it is community property, the question presents as whether there is liability for mismanagement of community property.</p>
<p>In separate property states especially, there is a doctrine in divorce law knowns as &quot;economic waste&quot; which in the most blatant case, involves damaging or destroying property in a manner that reduces the amount of marital property available for division.</p>
<p>Usually, when the economic waste doctrine applies (which it may even in a &quot;no fault&quot; divorce), then the property squandered, destroyed, or damaged is treated as if it still existed for property division purposes and allocated to the party who committed economic waste.</p>
<p>This said, the general concept of property division in a divorce is that marriage is an economic partnership and that both spouses should share in the upside and downside risks associated with owning the property that the parties to the marriage own.</p>
<p>Someone is not penalized for making a good faith investment with property of the marriage, even if the investment turns out in 20/20 hindsight to have been a horrible decision.</p>
<p>There is a gray area between losses from good faith investment, that give rise to no penalty and are shared by the spouses in a property division, and intentional destruction of property subject to property division in a divorce, for which the spouse at fault is almost always punished for economic waste as described about. This involves cases where the economic harm is negligence, grossly negligent, or reckless, but not actually intentional or in true bad faith.</p>
<p>Some states and some judges might apply the economic waste doctrine, or their more general discretion in making an equitable division of property, to punish the activity such as reckless day tradings, others might not. The best argument for holding a spouse responsible in a case of reckless or negligent conduct, is that most states recognize a fiduciary duty between spouses to each other and fiduciary duties generally include a duty to exercise reasonable care over assets in which another person has a beneficial interest. But, states vary in who the concept of fiduciary duty translates to divorcing spouses.</p>
<p>Another pertinent issue is when property is valued for purposes of a property division in a divorce. The majority rule is that property is valued for purposes of property division in a divorce at the time of the evidentiary hearing dividing that property. But, I believe that there are some jurisdictions that follow the minority rule that property is valued at the time that a petition seeking a divorce is filed, or at some other date set by law. A rule that values property at a date prior to the evidentiary property division divorce hearing may have the practical effect of operating as a strict liability economic waste rule.</p>
<p>Yet another consideration is that it is not uncommon in a divorce, either by operation of law, or by a specific motion requested by a party, for there to be a prohibition on spouses entering into transactions outside the ordinary course of day to day activities while the divorce is pending and violation of that order could both be penalized and constitute contempt of court. But, again, that depends upon whether the day trading is outside the ordinary course of business and day to day activity for the day trading spouse.</p>
