Finding Hidden Income With a Lifestyle Analysis

divorce lifestyle analysis May 03, 2022

You can read about what a lifestyle analysis is here.

A lifestyle analysis can uncover undisclosed income, either through direct or circumstantial evidence. The analysis of the bank and brokerage statements by the forensic accountant may find deposits that are clearly from a source of income that was not disclosed.

It is more likely, however, that the discovery of income will require an indirect approach. The lifestyle analysis, also called the “expenditures method” of income analysis, focuses on a spouse’s spending patterns relative to the known sources of income and funds.

Is the spouse’s spending in line with the known and reported sources of income? Is the reported income enough to fund the lifestyle?

If spending is higher than the disclosed income and assets, and is not explained through other cash sources such as loan proceeds, gifts, or inheritance, it is likely that the spending is funded through undisclosed income or assets.

Suppose your soon-to-be ex-husband discloses to the court that he makes $10,000 per month. You know he makes much more. We do a lifestyle analysis and find that he is spending $30,000 per month on his house, car, vacations, clothes, eating out, etc. Will a judge believe that he only makes $10,000 per month? Probably not.

The bottom line is that the lifestyle analysis can look at how much someone is spending on their lifestyle on a monthly or yearly basis, and compare that to the income they have reported. If the spending is higher than the income, it is very likely that there is a source of income that has not been disclosed.

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