In many of my divorce cases, the hardest issue is determining someone's real income. Income impacts upon child support as well as alimony. We live in an era where there is a huge underground economy. Think of some of the jobs and businesses where there is a lot of cash. Here are a few examples but the list is almost endless -- think of your landscaper, beautician, personal trainer, manicurist, anyone in the restaurant or bar business. Your local party store, grocery, construction, maintenance, home improvements, electrician, and plumber. Your babysitter, the person who cleans your house, your dog walker, commercial cleaner, people who have careers and moonlight with side jobs, personal companions and exotic dancers. I have represented people involved in gentlemen's clubs, bars, and restaurants. A double sets of books have been the rule and not the exception. Think of numerous professions in addition to those listed above. Some doctors, dentists, podiatrists, chiropractors will deal with cash. am sure that all of you can provide many more examples.
Here are some issues I have dealt with over the years: You can bring in a forensic accountant. You can do a lifestyle analysis. This is where you look at spending habits, mortgage, utilities, and credit cards. What is your lifestyle? Someone reporting $50,000 and living on over $100,000 clearly is going to raise question marks. I have had cases over the years where someone will report a low income of under $50,000 on an income tax return, yet will pay $300,000 in cash for a home. What is the truth? There are many situations where someone is voluntarily unemployed or underemployed. How does that factor in to divorce cases?
The courts will often look at whether or not someone lost his or her job through no fault on his or her part. It could be an economic downturn, it could be downsizing by a company. On the other hand, what if someone quits? These are issues that must be looked at. Health issues can be a factor with regard to income. Changing jobs or careers could be a factor. I have had cases where someone left a high paying job to go into teaching. Should there be a higher income imputed in the divorce documents? Courts will impute income based upon a higher income if a job loss or change of career is voluntary.
The economy has had a major impact in this area. I have found the courts to be much more lenient because of the downturn in our economy. Things are now starting to get better. My question is, will this change the attitude of the courts with regard to this issue of determining someone's real income?
We are dealing with a huge underground economy where people either fail to report or under-report their income. This has a tremendous impact in the event of a divorce, especially with regard to child support and alimony. As an attorney, I have found this to be one of the toughest areas to deal with. Discovery is critical. Looking beneath the surface can be essential.
The other and final issue is what if someone has been out of the job market as a wife or mother raising a family for the last 10 or 15 years? Should you impure income? I have found that many courts will impute income at minimum wage, saying that someone is able to get a job. Should they? This is an interesting and complicated area that impacts upon so many cases. These are some of my thoughts, what are yours?
By: HENRY S. GORNBEIN
Family Law Attorney & Legal Correspondent
40900 Woodward Avenue, Ste. 111
Bloomfield Hills, MI 48304-5116
248/594-3444; Fax 248/594-3222