An area of divorce financial analysis of great interest to attorneys and accountants is the standard of living, both during and after the marriage. Jurisdictions have varying factors that come into play when determining the standard of living during the marriage. The attorney must be familiar with local rules. However, this chapter details some of the most important factors to be considered in analyzing the standard of living of spouses.
To be clear, the discussion of standard of living in this chapter is simply the author’s viewpoint on the most important factors. This viewpoint was developed after consulting on the issue of lifestyle in family law cases in various states. The family lawyer’s local rules will take precedence; however, the factors discussed here may be presented to the court for consideration. The more familiar the family law attorney is with these issues, the better the attorney may be able to present the position and the more convincing the argument may be for the court to consider additional factors.
Introduction to Standard of Living
For the purpose of calculating alimony, courts consider a variety of factors, and the standard of living established during the marriage is included in that analysis. It is important to consider not only the standard of living during the marriage but also whether the parties can 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.
In some cases, however, it may be possible to maintain the standard of living established during the marriage, particularly if the family was living below its means or had very high income. If the family was not spending all that it earned on the lifestyle, it may be possible to fully fund two comparable households after the divorce. There may even be enough earnings to fund savings, which could be a part of the standard of living too.
Attorneys and financial experts sometimes argue that historical expenditures of the family (without any adjustments whatsoever) are the sole basis on which the standard of living should be established. This approach is upheld by courts in some cases, but often it is not a good way to calculate the standard of living because unusual things happen before and after divorce. The only way to properly account for those unusual situations is through adjustments to the historical expenditures.
Standard of living encompasses more than just historical figures. The five most important factors that should affect the calculation of the standard of living are:
- Earned and unearned income
- Funding sources for the lifestyle
- Actual historical expenditures
- Existence of unusual, nonrecurring expenses
- Reasonable needs in the future
Also included in this chapter:
Earned and Unearned Income
Funding Sources for the Lifestyle
Actual Historical Expenditures
Existence of Unusual, Nonrecurring Expenses
Reasonable Needs in the Future
Admission of Evidence