An area of divorce financial analysis that is of great interest to attorneys and accountants is the standard of living. Jurisdictions have varying factors that come into play when determining the standard of living. The attorney must be familiar with local rules. However, this chapter details the most important factors that ought to be considered in analyzing the standard of living of spouses.
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 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.
In some cases, however, it may be possible to maintain the standard of living during the marriage, particularly if the family was living below its means. 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.
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 sometimes upheld by courts, but it often 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 include
- 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