Lifestyle Analysis with Divorce Financials
What is Lifestyle Analysis?
When a couple decides to file for divorce, lifestyle analysis is the systematic reconstruction of income/expense inflows and outflow pre- and post-separation. The analysis establishes the parties’ marital standard of living, used as a benchmark in reaching a divorce settlement. Many recent court judgments have underscored a number of universal needs concerning lifestyle analysis. Litigants, divorce attorneys and family court judges must understand and appropriately consider “lifestyle.” In addition, developing a uniform approach to analyzing marital lifestyle, conveying the lifestyle analysis data to one’s adversary and ultimately, to the court, are critical.
Common Lifestyle Analysis Problems
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 for the spouse and dependent(s), the action may artificially reduce expenditures. In situations where spending is inconsistent with the historical marital standard, the periods of unusual expenditures should be excluded from the analysis. As an alternative, the lifestyle analysis results will provide data that is accurate, if you look at financial records in an earlier time frame to calculate spending more indicative of the marital lifestyle.
In the past, analyzing lifestyle was a matter of entering historic bank and credit card statements in a bookkeeping software program or on an Excel spreadsheet. Income and expenses were entered in separate categories and non-recurring items were marked as such. The problems with using bookkeeping software or an Excel spreadsheet are first, a lack of uniformity in data preparation and presentation, which can lead to significant disputes. Secondly, because generic bookkeeping or spreadsheet programs are not designed for sophisticated analysis and data entry, validation is cumbersome and error-prone.
The Divorce Financials Software Lifestyle Analysis module solves a need that is critical in the practice of family law. Using the Lifestyle Analysis module, you can systematically;
- Enter historical statements for bank, credit cards, debit cards and cash
- Separate transactions into individual categories
- Mark non-recurring items
- Locate discrepancies
- Generate courtroom ready reports
Your paralegal can easily prepare a Lifestyle Analysis – no need for a forensic accountant.
How Lifestyle Analysis is used in Divorce Settlements
Two most important considerations in alimony determinations are the spouses’ need and ability to pay. Although there are many factors involved in determining an alimony award, lifestyle is one of the most important. Lifestyle data plays a vital role in alimony negotiations and eventual agreement between the parties because tangible lifestyle data replaces generic arguments with fact-based demands.