Lifestyle Analysis in Family Law Cases

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Author: Tracy Coenen
Date: Summer 2018
From: American Journal of Family Law(Vol. 32, Issue 2)
Publisher: Aspen Publishers, Inc.
Document Type: Article
Length: 2,734 words
Lexile Measure: 1310L

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Determining the income of the parties to a divorce or child custody case is critical, as it affects spousal support and child support. It may also affect the division of assets, particularly if there are income-producing assets to be divided. In each of these instances, properly determining the income of the party is critical to getting a fair and equitable settlement, maintenance award, or child support award. Until you have accurate numbers, the attorney may find it very difficult to decide what is fair or in the best interest of the client.

It is not unusual for a closely held business to suspiciously suffer from declining revenue and profits once a family law case comes to fruition. The spouse in control of the business may state that the economy is negatively affecting the business, or that other conditions such as competition or changing technology are the cause for a decline in the financial condition of the business. Is it a coincidence that a thriving business just happens to suffer a decline at the precise time that a family law case is initiated? Of course it is no coincidence, and the numbers must be investigated to present a true financial picture to the court.

There are many situations in which it's hard to determine exactly what the income is for some of the following reasons:

* Poor bookkeeping

* Failure to disclose financial documents and details

* Lying about the finances

* Hidden income (under the table cash sales, etc.)

* Commingling of personal and business finances

* Complicated businesses

* Movement of funds between multiple business interests

* Intentionally confusing or incomplete paper trails

ACCESS DENIED

Universally, the most problematic part of thoroughly evaluating the income and assets of the owner of a closely held business is the lack of financial documentation. The "in" spouse often obstructs attempts to examine the financial condition of the business, citing confidentiality concerns, voluminous documents, or other red herrings.

Track document production and demand missing statements.

If documents are produced, they are usually provided piecemeal, so a complete financial picture can never be evaluated. It is important to track the document production and demand that missing statements be provided. Even one missing statement could drastically change the case, as that single missing statement might contain a transaction that could lead to the discovery of hidden assets or income.

It is not uncommon for documents to be discarded, destroyed, or purposely withheld. Even when substantial documentation is produced, there may still be holes in the financial picture due to things like unreported income and cash sales. Unreported employee perks or personal expenses paid by a company are additional items that may be missing from the financial picture provided by the other side.

This is where the forensic accountant can be very valuable to the divorce attorney. A properly performed lifestyle analysis can go a long way toward proving the existence of income and assets. It is important that your expert be a true expert, however, with a strong account background, preferably holding a...

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Gale Document Number: GALE|A541787093