For the most part, high-asset divorces follow the same procedural path as any other divorce. The difference is that the stakes are much higher.
Nowhere is this more true than with matters of property division and spousal support.
In order to reach a fair and equitable settlement, it is important that the court has access to a complete, accurate accounting of the couple’s finances. However, a lot of people tend to guess or estimate when filling out financial affidavits, either because they don’t know how to find the correct information or because they think a broad generalization is good enough to get the job done.
This attitude can be disastrous, especially if one spouse will rely on the other for financial support after the marriage is over.
Instead, experts recommend that couples seeking divorce contact a financial professional to have a so-called “lifestyle analysis” prepared.
Generally speaking, a lifestyle analysis is an in-depth incursion into a couple’s finances, designed to accurately recreate the standard of living to which they are accustomed. Although each lifestyle analysis is tailored to the couple’s unique circumstances, most involve an analysis of:
- All financial statements, including credit cards, bank statements and investment accounts
- Both personal and business-related income tax returns
- Day-to-day living expenses such as food, clothing, housing and entertainment
- Non-recurring or seasonal expenses, including travel
- Credit reports
- Any discrepancies noted in the two spouses’ reportings of their financial information
The information gleaned from a lifestyle analysis can be used to ensure that property division and spousal support decisions are made equitably – neither spouse will be awarded too much or allowed to contribute too little.
A lifestyle analysis has the added benefit of being able to uncover financial misdeeds and hidden assets. Sometimes, they reveal hidden bank accounts, unusual expenses or the sale of marital assets.
Although a lifestyle analysis may seem like a lot of work, the investment almost always pays off in the end.
Source: Forbes, “Why a Lifestyle Analysis is so Critically Important for Divorcing Women,” Jeff Landers, Feb. 14, 2012.