Once a forensic accountant completes a lifestyle analysis for a divorce case, how does the family lawyer use it? Attorney Miles Mason explains how he uses the lifestyle analysis to evaluate the lifestyle and the reasonable needs of a spouse.
When doing a lifestyle analysis for a divorce or child support case and evaluating historical spending, we sometimes run into unusual expenses that may be considered one-time (or non-recurring). What do we do with these?
Expenses that are not expected to recur should be excluded from the marital lifestyle. The rationale is simple: If an item will not recur, either due to the end of the marriage or some other relevant factor, it is not part of the lifestyle that must be funded post-divorce.
Examples of items that should be excluded from the marital lifestyle could include: Read More
When calculating child support or alimony obligations, “income available for support” is an important concept. In this video, Tracy talks about some of the issues that may arise when evaluating income.
We keep hearing about the divorce of Jeff and MacKenzie Bezos and how “his” fortune of $135 to $140 billion related to Amazon will be divided.
People are speculating that there is no pre-nuptial or post-nuptial agreement. Amazon was started after the couple was married, so the assets may be owned jointly and subject to a 50/50 split.
As we often see in cases in which the husband is the “moneyed” spouse (the one with the business involvement and the one whose name is on the paychecks), people talk about how much he will have to “give” his wife in the divorce. But where community property is involved, the spouses own the property jointly. Neither is “giving” property to the other. Instead, the property is divided. Read More
When a spouse owns a business, it can create some of the most complicated financial issues in a divorce. It is extremely important to dive into the financial records of the business in order to value it and to determine where the money is REALLY going. Tracy Coenen and Miles Mason discuss what documents a forensic accountant needs to evaluate the business.
I often talk about doing a lifestyle analysis in divorce, where I go through the personal spending of the parties in detail and make calculations surrounding the spending. But what about doing the same type of lifestyle analysis for a business? Why would we want to do that?
Closely held businesses present special challenges in the family law setting. Typically, only one spouse is actively involved in the business. Therefore, not only does the spouse control the family’s finances, he or she also controls all of the records of the business. When a spouse is attempting to quantify the income from the business or the value of the business, the spouse who works actively in the business can purposely (and often very effectively) obstruct attempts to get accurate and complete data. Read More
While a financial expert may be retained to proactively complete a lifestyle analysis in a divorce case, one might also be retained to do a rebuttal report focused on the analysis of an expert retained by opposing counsel.
The process is no different than if the lifestyle analysis is being done proactively. Income and expenses are tabulated, categorized, and allocated using the methodology I describe on this blog and in my book, Lifestyle Analysis in Divorce. Read More
In the early stages of divorce, clients are required to complete financial affidavits, financial declarations, or other similarly titled disclosures. The importance of an accurate disclosure of assets, liabilities, and income is obvious. Yet many clients are unable to accurately prepare this financial information.
Particularly in high net worth divorces, it may be difficult for the husband or wife to report these financial details because of a large volume of data and/or an inability to compute the numbers. The financial declaration will be a primary piece of information used to divide assets, calculate alimony, and calculate child support. Errors can therefore be very costly.
A lifestyle analysis completed by a forensic accountant can solve this problem, and can add other value to the divorce process. The lifestyle analysis is typically done to demonstrate the spending (or the lifestyle) of the family prior to the separation. Read More
In a typical divorce with one or both of the spouses having traditional jobs and earning middle to upper class wages, the calculation of alimony and child support are pretty easy. States have charts or standard percentages that are applied to the income to figure out how much one spouse should pay the other each month.
With high income households, it is not necessarily so easy. This is especially true for ultra high net worth clients. In those cases, the courts will look to the standard of living during the marriage. A forensic accountant will evaluate the cost of the lifestyle of the parties during the marriage (and also the lifestyle of the children) and that analysis will be used by the court in calculating support payments.
For the purpose of calculating alimony, courts consider a variety of factors, and the standard of living established during the marriage is included in those factors. It is important to not only consider the standard of living during the marriage, but also whether the parties are able to maintain a reasonably comparable standard of living following the divorce. In many cases, the same standard of living cannot be maintained because there is not enough income to maintain two households of comparable quality to the marital household. Read More
A financial professional can fill two distinct roles in family law cases. He or she can be a consultant who provides analysis and opinions privately to the attorney and client. The consulting expert’s work and conclusions are not intended to be presented in court, and are intended to be of an advisory nature. The other role is that of a testifying expert, alternately called an expert witness. The testifying expert must be disclosed in the event that the case goes to trial.
The services of a consulting expert may include:
- Explaining financial topics to the attorney and client
- Providing opinions and advice on financial matters, including the value of assets and liabilities, the taxability of settlement scenarios, and the strengths and weaknesses of the financial portion of the case
- Helping to develop a litigation strategy
- Devising a strategy for presenting financial issues to the court
- Evaluating a testifying expert’s work as a “second set of eyes,” which may help identify weaknesses or opportunities in the testifying expert’s work
- Scrutinizing the work of a financial neutral appointed in the divorce