Partner
When high-net-worth couples divorce, financial issues like property division and spousal maintenance can take center stage. Resolving these issues can require extensive testimony and financial analysis.
One tool available to both parties in high-net-worth divorces is a lifestyle analysis. This accounting analysis helps the parties, lawyers, and judges understand the true state of the couple’s finances so the parties can maintain their marital standard of living.
Lifestyle Analysis
A “lifestyle analysis” is a type of forensic accounting report. It uses financial records generated during the marriage to develop a picture of the couple’s earning, spending, and saving habits.
Conducting the Analysis
Your lawyer will supply documents to a forensic accountant for the financial analysis. The lawyer can use discovery requests to recover documents not in your possession. These requests can go to your spouse as well as third parties like banks, financial planners, and employers.
An accountant will need documents covering all of your income, assets, and liabilities, including the following:
- Tax filings
- Bank statements
- Credit card statements
- Brokerage statements
- Receipts/invoices
- Balance statements for any businesses owned by the couple
- Retirement or pension account statements
- Loan and mortgage records
Depending on your assets, you may also need to supply insurance records or independent appraisals showing the valuations of:
- Homes
- Vehicles
- Personal property, like artwork, jewelry, and collectibles
- Intangible property, like copyrights and ownership shares of businesses
The accountant will use this information to create a marital “balance sheet.” This report will show your family’s historic income and spending habits.
A more detailed analysis will also project what will happen after divorce based on each spouse’s income, assets, and spending. It may even predict financial changes due to major life events like retirement.
Using the Results
Issues around alimony, also called spousal maintenance or spousal support, and property division can arise in any divorce. But in high-net-worth divorces, these disputes could amount to millions of dollars.
When facing numbers of this scale, the parties and their lawyers often find it worthwhile to spend the time and money on a lifestyle analysis to support their side of the financial story.
Specifically, New York courts can use spousal maintenance and awards of property to compensate for disparities in the spouse’s economic prospects.
For example, suppose one spouse earns seven figures annually because the other spouse put them through school and maintained the house. Both have become accustomed to living with the salary earned by the first spouse and the second deferred their education and career for the first.
In this case, a court might reasonably use the information from a lifestyle analysis to ensure the second spouse has the time and financial support to start or restart their career. The lifestyle analysis will help the judge award an amount of property or spousal maintenance needed to maintain the marital standard of living while they do this.
A lifestyle analysis can also be used defensively. Thus, the spouse who may need to pay alimony can show the couple’s spending habits incurred marital debts that the other spouse should share.
Finally, a lifestyle analysis is not necessarily intended to uncover hidden assets or sources of income. But it can expose inconsistencies that might prompt further investigation.
Contact a High-Net-Worth Divorce Lawyer
High-net-worth divorces frequently involve complex finances. A lifestyle analysis can simplify these transactions so a judge can focus on the big issues in the couple’s economic state. Armed with these numbers, the parties can argue for a fair property and spousal maintenance award. Contact Aiello & DiFalco, a family law firm in Garden City, New York, to discuss how a lifestyle analysis can help in your divorce.