The Marital Standard of Living ("MSOL") is one of 16 factors set out in Family Code section 4320 to be considered by a divorce court in determining spousal support. The MSOL is an important factor, but not a controlling factor. The MSOL does not set a floor or a ceiling for spousal support in a divorce but rather serves as a guidepost.
Divorce courts generally accept spousal agreements concerning the MSOL and issues related to spousal support. Divorce courts have wide discretion in determining the MSOL and are not under any obligation to define it by a specific dollar amount. Divorce courts can simply describe the MSOL with a descriptive term such as “high” or “med-high.” However, when divorce courts identify the MSOL by a specific dollar amount, it refers to after-tax dollars. For example, a $10,000 per month MSOL means that the community earned $10,000 net each month. When determining the MSOL, divorce courts consider all evidence presented at a divorce trial and typically examine the three years prior to separation, although divorce courts occasionally examine the prior five years. The MSOL examination may require the spouses to individually or jointly retain a financial expert, which often causes the spouses to incur significant fees.
Divorce judges have wide discretion in determining how to define the MSOL. Divorce courts are not required to define the MSOL using a specific dollar sum. After hearing the evidence, a divorce court may simply describe the MSOL as “high,” “med-high” or use another descriptive term.
The MSOL may also be defined by using the total income for a reasonable period of time less the actual taxes and set the MSOL at the net number. Simply stated, the divorce court may use the net income of the community for a three to five period. The divorce court may exclude years that were not representative years or exclude sources of income that are non-recurring. For example, if the total income during a three-year period was $1,000,000 and the total taxes paid were $250,000 then the net income would be $750,000 or $20,833 per month and $10,416 per month for each party. This approach has been cited in a few reported divorce appellate court opinions, but is used less frequently than the mainstream method described below.
If the divorce court uses the expenditure approach, the analysis starts determining the community's actual expenditures of the three years prior to separation. Most experts agree that the analysis excludes non-recurring expenditures (house remodel, catastrophic losses, a wedding, etc.). The total community expenses are often divided by two to arrive at the MSOL for each party.
For an example, if the total monthly community expenditures averaged $14,000 over the 36 months, then the sum of $7,000 would be assigned to each side as their respective MSOL.
The fact that it costs more for two to live separately than together, alternatively reflects that the total expenditures could be multiplied by 60% or another percentage. Using a percentage approach would be:
$14,000 x 60% = MSOL or $8,400 net per month for each party
Another way to address the allocation of the $14,000 is to equally divide all expenditures except housing related costs and then add the housing costs onto each party’s share of the other expenses. In other words, if the total expenses were a net of $14,000 per month and that number included housing costs of $4,000 per month, the analysis would be:
$14,000 - $4,000 = $10,000; $10,000 / 2 = $5,000 for each party (plus $4,000 for housing related costs) for a total MSOL of $9,000 net per month for each party
In allocating the total community expenses and housing costs, it may be relevant to consider allocating the costs of a particular house to each party. It may not always make sense. For example, if a house was 7,000 square feet and all five kids were grown adults, then it makes sense for each party to replace the house for themselves post-divorce. Arguably, the house related to the children’s lifestyle rather than the party's lifestyle.
The divorce court, may also consider other financial issues. For example, a community’s vacation home sold due to divorce will not be available to either party after the divorce. Arguably, the loss of this asset will affect the MSOL. A divorce court may reduce the MSOL by the value of this type of asset.
The MSOL is used in the context of determining whether the amount of post-divorce spousal support is sufficient for the supported spouse to maintain the marital lifestyle after a divorce. If the MSOL and needs of the supported spouse equaled a net of $9,000 per month and the spousal support order was a taxable $8,000 per month that sum resulted in a net of $5,555 per month—that spouse would not be able to live at the MSOL after the divorce. In this situation, the supported spouse would have the ability to return to the family law court to seek an upward modification of the spousal support order if and when the supporting spouse’s income increased. The MSOL would serve as a benchmark for the family law court in evaluating the circumstances relative to a modification of the support order after the divorce judgment is entered.
On the other hand, if a spouse’s MSOL was determined to be $9,000 net per month and that spouse’s combined net income after the divorce from employment and investment earnings equaled or exceeded $9,000 per month, there would be no need for post-divorce spousal support.