There is a not too uncommon phenomenon that is frequently seen in divorce cases. Specifically, as soon as the notion of a divorce action become a reality, many supporting spouse’s incomes suddenly, and usually without valid explanation, drop substantially. It may come as no surprise that someone may want to manipulate their income when an alimony or child support obligation is about to be set. This affliction is sometimes known as "R.A.I.D.S." or Rapidly Acquired Income Deficiency Syndrome (sometimes also known as "SIDS" Sudden Income Deficiency Syndrome.)
That is not to say that there are not valid, legitimate and explainable deviations in someones income. Some people are in commission sales and one year is legitimately better than another. Perhaps someones income is tied to real estate. That person may have a legitimate reason why 2007 and 2008 are down years. Mortgage bankers are probably having trouble now as are realtors. I recently had a case where if you looked at my client’s tax returns and W-2s, one would think that support should have been based upon a seven figure income as opposed to a mid-six figure income. In this case, there were some discrete one time payments from exercises of stock options and change of control of companies that he worked for. These are not the situations I am talking about. In fact, when there is non-recurring income, it may be legitimate to back it out for purposes of computing support or else the support would not be fair to the payor. When income legitimately fluctuates from year to year, the Child Support Guidelines and decisional law suggest taking an average (3 or 5 years is common).
The cases that I am talking about are those where there is no explanation for the sudden drop in income. Very often, this occurs when the supporting spouse is self employed. There are many ways income is hidden. Sometimes, it is just not collected – as possibly evidenced by a large rise in accounts receivable. Sometimes, there may be several capital expenditures or large equipment purchases, which reduce the profits and thus the income. Other times, perquisites or personal expenses paid by the business increase dramatically. Check the business credit cards – they are often illuminating in this regard. Cash is also a possibility as are other manipulations with payments received.
In these cases, discovery is critical to smoke out the true income and real reason for the alleged reduction in income. The use of a forensic accountant is often essential to get to the correct income number.
RAIDS is certainly an illness that can be diagnosed and with the proper team of lawyers and experts, cured so that the supported spouse is treated fairly.