What Is a Lifestyle Analysis and How Does It Affect Alimony? As Seen in The Union-Morris Women’s Journal (Aug/Sept 2007)
Jan L. Bernstein, Esq.
In the State of New Jersey, the lifestyle led during the marriage provides a foundation upon which to base decisions related to the support of a spouse after a divorce. According to the New Jersey alimony statute, there are thirteen factors to be considered when determining the amount of alimony a dependent spouse is entitled to receive. One of the factors concerns the standard of living established during the marriage and the likelihood that each party can maintain a lifestyle reasonably comparable to that standard after divorce. In 2000, the New Jersey Supreme Court stated in a seminal case that the marital standard of living experienced during the marriage must be established to determine the appropriate amount of alimony that will be paid to a dependent spouse. So, how does one go about establishing the marital standard of living?
How Do I Prove My Marital Standard of Living?
The marital standard of living reflects the monthly and annual expenditures of the family during the marriage. As a preliminary matter, once a Complaint for Divorce and an Answer (or Counterclaim) to the Complaint for Divorce have been filed, both parties are required to complete a Case Information Statement. A Case Information Statement is a sworn statement of the standard of living established during the marriage. This is a very important document. The required information on this document includes: income, insurance information, a budget of your living expenses, a summary of your assets and a list of your financial liabilities. However, the Case Information Statement provides the Court with only a snapshot of your current financial situation. In some cases, it may be important to show how your family utilized money in the years prior to the filing of the Complaint for Divorce. One way to prove the historical marital standard of living is to employ a forensic accountant to perform a "Lifestyle Analysis".
How is a Lifestyle Analysis Performed?
When conducting a lifestyle analysis, a forensic accountant will review spending records such as checks, cash withdrawals, bank statements, brokerage account statements and credit card statements. The analysis will cover the actual family expenses, including savings and investments and is usually conducted for the three consecutive years prior to the filing of a Complaint for Divorce or separation (whichever occurred first). The accountant will adjust the analysis for one time expenditures such as the purchase of a piece of property or the payment of a one time repair bill (i.e. the cost of a new roof).
After the accountant reviews all the records and statements, he or she will prepare a comprehensive Lifestyle Analysis report. The report will break down the family expenses by category (usually shelter expenses, transportation expenses, and personal expenses). The end result is a comparison of all expenses over a three year period. The accountant will also review the family's cash flow from all sources (income, investments, business, etc.) and "reconcile" the analysis to account for all available income. If, after reviewing all income from all sources, more money is being spent than is being brought into the family, the spending in excess of what has historically been reported as income must be discovered. At the conclusion of the investigation, the lifestyle analysis will identify exactly how much money will be needed monthly after the divorce to sustain the marital lifestyle. Your attorney will then use this information to negotiate a settlement for your case, or to present to the Court at trial if settlement is not possible.
Divorce Planning: One common problem arises when one party, in contemplation of divorce, unilaterally alters the historical spending practices of the family. For example, if the supporting spouse moves out of the marital residence and refuses to provide adequate support to the dependent spouse, this could artificially reduce expenditures. In these situations, the accountant may exclude these time periods from the analysis if the spending is wholly inconsistent with the historical marital standard. In the alternative, the accountant may look at records prior to the beginning of the three year period to calculate spending more indicative of the marital lifestyle.
Expenses Paid by the Business: If a family business is involved, the lifestyle analysis should account for any expenses paid by or through the business. For example, if the supporting spouse uses a company car, or uses a company cell phone, these personal "business expenditures" must be calculated and added to the appropriate category in the lifestyle analysis.
Although there are many factors a court must consider when determining an award of alimony, arguably the most important is the marital standard of living. In cases involving substantial assets, it is especially important to employ the services of a forensic accountant to present an expert opinion and testimony at trial if necessary. As all cases are fact specific, your attorney will be able to advise you if a lifestyle analysis is appropriate in your particular case. For more information, contact a Phillips Nizer family law attorney.