One of the most common issues in divorce litigation is determining the appropriate amount of maintenance, both final and temporary. Obviously, the moneyed spouse wants to pay as little as possible, and the payee spouse wants to get as much as they can. Since one of the major factors for determining maintenance in New York is the marital standard of living the parties had before filing, each party is going to take a different view of what that “standard” actually is. Typically, the expenses and income of each party are shown in a sworn financial affidavit, known in New York as a sworn Statement of Net Worth.
However, this already thorny issue can become even more complex when the numbers don’t add up, or a party suddenly cries poverty based on loss of income. However, New York courts have developed a method for dealing with this issue, known as imputation of income.
When a court imputes income, they are making a determination that the party they are imputing (or attributing) income to either earns more than they are stating or are capable of earning more than they are claiming.
The second scenario, imputing more than a party can earn more than they presently are, typically occurs when a litigant is trying to minimize their income so they can have a lower amount of maintenance and/or child support order. This will involve the party in question stating that they were let go from their job, or quitting their job and taking a lower-paying position. Other times, they will claim to be out of work. Or, if they are employed at their full capacity, they will neglect to include the value of certain benefits or “perks” of their position (such as company housing, a car, vacations, or other benefits) that, if included, increase their disposable income.
To address this, the court will often evaluate if the party claiming to have lost their job did so through no fault of their own (in which case they will make a determination of maintenance and/or support reflecting the new economic reality of the parties) or left the position voluntarily or were let go for bad behavior. If the party claiming a loss of employment chose to leave the position or was let go for cause, the maintenance calculation will be done at the higher income. This includes when a party changes professional fields voluntarily or deliberately takes a lower paying position.
Another aspect the courts will consider in imputing income to someone who claims to now be making less since the action was commenced is whether that party is capable of earning more and chooses to be unemployed. This can be applied to the less monied spouse. For example, someone who chooses to work part time but is capable of finding a higher-earning full time position based on their education and field may be imputed as having a higher earning potential so have to pay more maintenance, or, if they are the payee spouse, receive less.
In the other scenario mentioned earlier, where a party deliberately claims less income than they have (typically where a party has a cash income source or works “off the books”) the less monied spouse may feel they are without recourse to show what their ex should really be paying. However, New York courts will often impute income based on what is known as a “Lifestyle Analysis,” which compares a party’s claimed income in their Statement of Net Worth and tax forms to their stated expenses and other evidence of the lifestyle or living standard they have previously and currently maintained. Typically, the analysis will look at:
- The parties’ personal and business tax documents;
- The parties’ expenses (for example, where the Statement of Net Worth and the income claimed on tax documents don’t line up);
- The types of expenses incurred (for example, someone on a $50,000 a year budget shouldn’t be able to afford a $100,000 car and multiple European vacations without an additional income source;
- Unusual or unexplainable expenses or transfers (such as making multiple transfers of funds to an undisclosed location);
- Credit Reports; and
- Any other discrepancies. It is important to note that social media postings by a party can be utilized to show a certain standard of living as well. It is much harder to claim you can’t afford to pay maintenance when you brag about your expensive purchases or financial achievements online.
In other words, if the types of expenses and lifestyle led clearly are much more expensive than the income and assets claimed, or it appears there is income being diverted to another, undisclosed account or individual, a court is going to be more likely to attribute a higher income to the person crying poverty in doing a maintenance calculation.
Therefore, whether it is a spouse blaming the economy for a much lower post-filing income, or reporting far less than they earn in cash, a divorce litigant seeking maintenance should keep careful track of the financial moves that they and their soon to be ex make: how they work, how they spend, how that compares with what was earned and spent before the separation, and the lifestyle they and their soon to be ex are maintaining with the income they allegedly have. This way, if there are discrepancies, the Court will be more likely to impute the income and award the proper amount of maintenance, allowing both spouses to maintain their pre-separation standard of living, or as close to it as possible.