Protecting Your Client’s Maintenance Rights – The Use of Lifestyle Experts in Divorce Cases

I. INTRODUCTION

In high net worth divorce cases, the amount of maintenance to be paid to the non-wage earner spouse is often a critical issue for determination with the payor spouse usually wanting to minimize the amount of support to be paid, while the recipient spouse wants to maximize the ongoing support.  What results is a battle over the recipient spouse’s reasonable needs, measured against historical expenses, the standard of living enjoyed during the marriage, and anticipated or projected costs.  In cases where a recipient spouse’s monthly living expenses reach high levels, sometimes exceeding $20,000 per month, establishing the accuracy of the historical expenses solely through the client’s own testimony is often difficult.  In those situations, a family law practitioner should seriously consider using a lifestyle expert to assist the court in establishing lifestyle and reasonable living expenses.

II. LIFESTYLE EXPERT

A lifestyle expert is a person with some specialized training or expertise in accounting or financial analysis, whether from a business or personal perspective.  Such an expert can be a certified public accountant or a forensic accountant, but such certifications are not required.  Typically, the lifestyle expert without an accounting license will have some financial background, whether by educational training, such as a Masters in Business Administration, or through practical experience in the financial sector.

A fairly recent addition to the types of outside consultants and experts used in divorce cases is the Certified Divorce Finance Analyst.  A Certified Divorce Financial Analyst is someone who has obtained certification through education and examination on the financial and tax aspects of the divorce process and has specialized knowledge of the tax ramifications of property division and support as well as the division of retirement assets.  A Certified Divorce Finance Analyst, depending on the individual’s experience and qualifications, will usually qualify as a retained lifestyle expert.

III.    THE ROLE OF THE LIFESTYLE EXPERT

The lifestyle expert is typically retained to prepare a projected budget or expense report for a maintenance candidate based upon the historical and projected expenses of the spouse seeking the award.  Less frequently, the person opposing the award retains the expert, although this is not as common.  The conclusions of the expert are presented in a written summary report that will identify the total monthly expenses broken down by category for each particular expense.  Attached to the final summary report will be detailed expense reports evidencing how each monthly figure was calculated, together in some instances with corresponding footnotes if necessary to explain each figure.

The first decision to make in connection with preparing such a report is the time frame that the expert is to analyze.  Because standard of living is a critical component of any maintenance award, the time period selected should be fairly representative of the parties’ lifestyle while living intact as a family unit.  Therefore, a period of time prior to the date of separation should be analyzed to reflect the actual standard of living.  Discussions with the client will determine what time frame best represents the parties’ historical spending.  Generally, the longer the time period analyzed, the more credible the report, assuming there are not wide deviations in spending from year to year.

Once the attorney and client select the time frame, the client should provide to the expert all records that support the parties’ historical spending.  Documents should include bank statements, cancelled checks, credit card statements and other appropriate and similar records that can be relied upon by the expert as the source data upon which to base conclusions.  Once all of the documents have been assembled, whether by collection from the client or through appropriate discovery requests, then the information contained in the documents relating to a client’s spending should be put into a database software program such as Quicken or Quickbooks so the data can be grouped and categorized in a concise fashion for easy reference and search capability.  Every transaction should then be categorized based upon the expert’s existing knowledge of the payees, any outside research or inquiries made into the nature of the expenses, discussions with the client, and details from available deposition transcripts.

After all of the data has been entered into the software program and then categorized, the expert, based upon discussions with the client and input from counsel, should determine what adjustments, if any, to make to the analysis for expenses that are non-recurring, such as capital expenditures, major improvements, and similar types of payments.  Further, it may be appropriate to make certain projections for various known expenses that may be increasing or decreasing in the future, including the cost of necessary replacements.  Whether to include or eliminate typical non-recurring categories of expenses such as major repairs and capital improvements will have to be determined on a case by case basis depending upon the particular facts and historical spending.