A Lifestyle Analysis is the process of analyzing the income and expenses of the parties, so they can be confirmed or refuted. Particularly where there has been an affluent lifestyle, the court will require documentary support for the expenses that are being claimed by a spouse in his or her Financial Affidavit. (Note: Financial Affidavits are called different things in different states. For example, in New Jersey, it is called a “Case Information Statement (CIS)”, in Utah it’s a “Financial Declaration”, and in New York it’s called a “Statement of Net Worth.”). I have worked on cases where in any month, there were hundreds of purchases, and it can be a daunting task. However, that amount of spending demonstrates why it needs to be proven. Being able to tie each expenditure to a statement so that evidence to justify the support being requested is irrefutable strengthens a client’s position at the negotiating table or in court.
A Lifestyle Analysis reconstructs the day-to-day living expenses incurred during your marriage and the spending habits of both you and your husband, by category. This information is usually derived from bank and credit card statements. Sources of income are analyzed and then compared against the expenditures to verify that income is accounted for. Transfers between accounts are also traced to be certain funds are kept within “known” accounts, or to discover new accounts.
Hidden sources of income or dissipation of assets can also often be uncovered in a Lifestyle Analysis. Excessive ATM or other cash withdrawals can point to drug or gambling habits or other activities not beneficial to the marriage. When there is a cash business, the bank and credit cards statements can be examined and then I can work with my client to “back in” what is missing. For example, the family regularly went boating, but there is no evidence of maintenance, storage, or gas for that activity. Or the family regularly ate out and the grocery costs are ridiculously low. Clothing, hobbies, collections, and travel are other examples of things commonly paid for with cash when there is a cash business.
Generally, a Lifestyle Analysis will analyze the living expenses during the last several years of a marriage but before income and spending habits changed in anticipation of divorce, and can include an analysis of:
- bank, brokerage, and credit card accounts
- personal and business income tax returns
- recurring and ordinary expenses within each category of expense (clothing, food, housing, entertainment, travel, etc.)
- unusual, non-recurring and/or seasonal expenses
Who should prepare my Lifestyle Analysis?
Your family law attorney (with the help of their paralegal) may offer to help you prepare a Lifestyle Analysis, but he or she is unlikely to have the specialized training and expertise in divorce finances, or the specialized software, to do the job as thoroughly, efficiently, or cost-effectively as a Certified Divorce Financial Analyst™. Some might try to get this done with the help of their CPA or financial advisor but divorce finance is simply not their specialty, so they haven’t had the advanced training or hands-on experience needed. Family law attorneys should welcome the expertise and support of a Certified Divorce Financial Analyst™ when it comes to preparing this important evidence for their client. Although gathering the documents to complete a thorough Lifestyle Analysis can seem daunting, and may be expensive if your spouse is intent on withholding information, the result, particularly for an affluent couple, is extremely valuable.
