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Spousal Maintenance

  • D L
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10 years 10 months ago #132488 by D L
Spousal Maintenance was created by D L

What is it?


The legal term for spousal maintenance is “periodical payments”, which are governed by section 21(1) of the Matrimonial Causes Act, and to which the considerations of section 25 apply. Simply put they are payments made periodically (usually monthly) by one party to the marriage to maintain the other party. You can find the Act here:
www.uk-legislation.hmso.gov.uk/RevisedSt...cukpga_19730018_en_1

On an application for spousal maintenance, the court has 8 options:

1. To grant the application by way of an order for £X per month without limit. This is colloquially referred to as a “joint lives order” as unless it is discharged by further order or the remarriage of the receiving party, it lasts until the death of one of the parties;
2. To make a nominal order of say £1 per year, to keep the door open for an application at a later date should the applicant’s circumstances change;
3. To make a “term order”, that is to make an order for £X per month for a specified amount of time or until a specified event, such as the receivers’ cohabitation with a person of the opposite sex. However, without the bar mentioned below the receiver can apply for an extension to the term providing the term has not yet ended;
4. To make a term order with a bar to applying for an extension;
5. To make an order adjourning the application, which means the applicant can restore it at any stage;
6. To make a deferred order to come into effect on a specified date, which is usually the payer’s retirement - colloquially this is known as an “earmarking” order, and is technically one of the pension orders;
7. To make an order dismissing not only the claim, but the right to make the claim again;
8. To make no order – this then leaves matters open for argument that as the claim has not been dismissed, it has been adjourned, and as arguments are expensive, this is an order that ought to be avoided.

Who can apply?


The person with the lower income of the two parties to the marriage. Even today this is usually the wife, but there is nothing stopping a lower earning husband from applying. The key factor is that there is a disparity in incomes. Unlike the other financial orders a spouse who has remarried cannot apply, even if the remarriage took place after the application was made.

How do you apply?

Using a Form A . It is rare to apply for periodical payments in isolation; usually the application forms part of the global application for ancillary relief. There is the option to apply during the course of the proceedings for maintenance pending suit, which is the subject of a further article.

What is it for?


Put simply, it is to maintain the lower earning party. Since the case of McFarlane ( www.familylawweek.co.uk/site.aspx?i=ed2060 ) the courts are now entitled to factor in a compensatory element to periodical payments, for example where wife gave up a career to raise children. So while the general rule was that the receiver had to prove need and the payer had to demonstrate an ability to pay; the onus is no longer on the “need” of the receiving party especially in higher income families.

How does the court decide whether to make an order?


Given that the court has to consider making a clean break in all possible cases, the first consideration is whether to make an order at all. Should the court decide it is fair in all the circumstances of a case to make an order, the next consideration is how much the order shall be for. Once that is determined, the court then decides the duration of the order.

Should there be an order at all?


If there is a reasonably large disparity in incomes (and bearing in mind “income” is income from all sources, including (but not limited to) child maintenance; tax credits; state benefits; income from employment and self employment; private income) then the answer is usually yes, an order for periodical payments should be made, providing the paying party can demonstrate a need, and demonstrate the paying party has the means to pay. “Need” is something that varies in case to case however, and is largely determined by the lifestyle enjoyed by the parties’ pre-separation. The court has to look at all the section 25 criteria, and most important here, especially when considering the length of the order, is firstly the length of the marriage and secondly the earning capacity or potential earning capacity that the receiver has.

A further relevant factor is cohabitation , on both sides of the coin. If the payer is now cohabiting with a non-earner this does not negate the duty to pay (and the court has to give first consideration to the “first” family), however, the court cannot simply ignore his or her obligations to the second family and how this reduces the available income to pay. The flip side is if the receiver is cohabiting . While the courts repetitively point out that cohabitation falls far short of marriage, the court also recognises the “social revolution” towards cohabitation over marriage. While the earnings of any cohabitee are not directly taken into consideration, the fact that those earnings lead to a contribution to the household is valid, and therefore reduces the need of the receiver. It is the rare case now that a cohabiting applicant will receive anything much if at all.

How much?

Hmmm well ask a lawyer and you will receive the answer along the lines of “the court has a broad discretion” for which read “haven’t a clue”. Not helpful, I appreciate. The old school approach was “one third; two thirds”, but that has long gone. The proper starting point is to consider all the section 25 criteria and draw a balance. That also is not really a helpful answer if you are representing yourself. The truth of this matter is that lawyers and judges develop an intuition as to what is fair in all the circumstances of the case. It is unfortunate that there is not a formulaic approach, but this is something the courts have avoided.

To be able to attempt to calculate how much, the first port of call is to calculate the “need” of the receiver. The basic calculation is his/her outgoings minus any income he or she receives. If there is a gap there is a need, and that forms the baseline figure. Then one looks to the resources of the payer, and if there is an ability to pay that baseline figure. If so, it is awarded. However, that is not the end of the calculation. One then looks at the lifestyle the parties enjoyed during the marriage. If the payer can afford to pay more so that the receiver can continue to enjoy a similar level of lifestyle, then that will be so. The payer will not, in most cases, be ordered to meet payments that push him below subsistence level. However, if since separation the payer has been reckless in the responsibilities assumed, the court will overlook the level of need required to pay those liabilities and prioritise the needs of the receiver.

Once there is a figure the court will look the effects the proposed order will have on the respective incomes and consider if it is fair in all the circumstances. It would be the rare order that amounted to more than 50% of the payer’s net income when spousal maintenance was added to child maintenance. The court also has to look at the orders for capital division and weigh the maintenance order in light of those orders. Particularly relevant is a pension sharing order. If there is such an order, and the effect is to achieve parity of income in retirement, the order should end on the pension order taking effect, and there should be a bar to extending the term put in place.

Finally, there are special considerations for servicemen, and the amount of maintenance the spouse of armed service personnel is limited.

When representing yourself on an application it is helpful to the court if a “net effect schedule” is prepared. This is a document that shows the global income of both parties if X order is made. So for instance, say it would seem the figure of maintenance is between £500 and £1000. Do a schedule showing the global net incomes of both for £500, £600, £700, £800, £900 and £1000. The court then has a ready reckoner to refer to and can see almost at a glance what is the fairest order to make in the circumstances.

How long for?


Section 25A(2) of the Matrimonial Causes Act 1973 requires the court to consider limiting the period of the order to that which enables the receiving party to adjust to being financially independent. This is particularly relevant in short marriages, and marriages of a longer duration but where the receiver has an earning capacity of his or her own. The phrase often used is a “feet finding” period – i.e. a period of time which enables the receiver to find their own feet.

The order can last for life, particularly after a long marriage during which the receiver has not worked. With joint lives orders it is common for an order to be made that the payer takes out a life insurance policy so that the receiver is not left without the income stream on the death of the payer. If no such order is made, or if a policy is not taken out, the receiver has a claim on the estate of the payer under the Inheritance (Provision for Family and Dependents) Act 1975.

If a pension sharing order has been made, the spousal maintenance order should end on the pension sharing order coming into effect, otherwise there is double counting.

Capitalisation


Should there be the liquid assets available the payer can opt to capitalise maintenance to achieve a clean break . This is by no means a cheap option, and is one the court can reject, particularly if there are young children, as the court may consider it wiser to keep the door to upward variation open should anything happen to the parent with care. As an example of the costs of capitalisation, lets take the example of a 40 year old wife who has a need of £15,000 per annum. Capitalised for her lifetime, the payer would have to find £306,000 to buy out that claim, according to the tables used by the court for the purposes of calculating capitalisation.

Are there any tax implications?


Very simply, no. The receiver does not pay tax on spousal maintenance received. Until 2000, tax relief was available to the payer, however, this has now been abolished.

Variation

Either party to an order for spousal maintenance may apply to the court to have that order varied or discharged. On such an application the court may vary the payment upwards or downwards; discharge the order or capitalise it by way of lump sum order, pension sharing order or property adjustment order. It should be noted that a pension sharing order is only available if the original divorce petition is dated after 1.12.00.

When considering variation the court again refers back to the section 25 checklist, however, what is of most importance in these applications are any changes to the circumstances of the parties. However, it is not as simple to say the payer no longer works; the order was calculated on his income of £75,000 per year therefore the order should be discharged. If the payer has deliberately given up work, and proposes say to live off capital until retirement, the order will not necessarily be discharged (indeed that that scenario it is unlikely to be discharged). Similarly so, it is not as simple as to say that the receiver is now earning therefore there should be a reduction. The court is entitled to consider that it was envisaged that the receiver would eventually receive an income and therefore the order should remain. Should either party consider an application for variation, the party considering applying should weigh up all the factors of the case before filing the application, especially as it is more usual for the unsuccessful party to pay costs in a variation application than it is on a full application for ancillary relief. The application is made by way of Form A.

Spousal maintenance and benefits


Spousal maintenance does not affect working tax credit. It does however affect income support, housing benefit and council tax benefit, so one has to consider the wider implications of maintenance on the whole income of the receiver.

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  • SarahSonley
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10 years 3 months ago #187635 by SarahSonley
Replied by SarahSonley on topic Re:Spousal Maintenance
that is a very helpful and informative report, thanks.
i am in process of working out what i might claim from spouse. in general we have agreed to split most things 50:50 and mutually agree for me to have our daughter live with me. I am concerned that i am approx £800 out (from the outgoings minus my income calculation) and how is my spouse ever going to cover that. hes probably on 3 0r 4 thousand per annum more than me but has 3 tousand pound travel expenses into london. But then if im mainly sole carer of our daughter, what do you think i could get. 1 work part time on approx 16.500 PA, spuse is on approx 22,ooPA.
Once i start applying for WTC etc, and if this effects possible council tax benefits etc, should i leave well alone and stick to 50:50 and come to some arrangement with him to help cover upbringing costs!? or do i have rights that can help me cope financially.?
thanks
sarah s:blush:

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  • 40ormore
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9 years 9 months ago #221386 by 40ormore
Replied by 40ormore on topic Re:Spousal Maintenance
Are there any examples of what constitutes reckless behaviour if the higher earner elects to reduce his or her income? Clearly no one can be forced to work in a highly paid job. How might the courts view a higher payer electing to move to 4 days a week rather than 5, especially if say that continued to generate a fairly substantial income of say 70,000 rather than 90,000 leaving adequate income to meet main \"needs\" of both? What if the higher payer elected to move to say charitable work that only generated a net income of 15,000 to 20,000 from full time employment?
In any event, to what extent is the lower or zero earner obliged to earn an income especially with children of secondary school age and say with two of them being over 16?


thanks

CP

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  • LittleMrMike
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9 years 9 months ago #221401 by LittleMrMike
Replied by LittleMrMike on topic Re:Spousal Maintenance
This is a very good question, and I wish I knew the answer.

I think it is true to say that the courts can and should, consider the earning capacity of both parties, not merely the payer, and the over-riding guideline is reasonableness. Unfortunately, to some extent the concept of reasonableness is subjective. That means you can easily get different outcomes from different judges on the same facts.

As far as the payer giving up work is concerned, well, I can see circumstances where a high earner may want to ' wind down ' and take things a little bit easier approaching retirement. I've always thought that a gradual transition might be preferable to a situation where on Friday you have a stressful job and on tghe following Monday you can have a lie in and you're just another pensioner.

Of course, the Courts can't force anyone to remain in a highly stressful job, especially if the health of the individual is put at risk. In theory they can attribute a notional earning capacity to a spouse ( which includes the woman too )
so that the payer will not have his obligations reduced if he takes a lower paid job.

As you say, this is a grey area and the outcome may depend on what judge you get.
If there is evidence that a payer is deliberately running down income to spite his ex, that is one thing ; but if a high earner is, for example, called to the ordained ministry ( and some are ) and has a genuine vocation - what then ? There is, as far as I know, no precedent for how the Courts might treat such a situation.

But I suppose it is true to say that a divorced wife is playing a risky game if she decides to rely on maintenance as her sole means of support.

As to the issue of a divorced wife having to work, this, by contrast, is very much of a live issue. And again, it may well depend on which judge tries the case. All will pay lip service to the idea that a divorced wife should seek employmewnt when she is capable of it. But some will impose it more vigorously than others. It would be wrong not to acknowledge that there are many women who regard the idea of being dependent on a former husband quite repugnant. But as a general rule of thumb, and it is no more than that, a woman should be expected to seek work, even part time, when the youngest child starts secondary school .

LMM

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9 years 9 months ago #221486 by girlblue
Replied by girlblue on topic Re:Spousal Maintenance
Yes I agree regarding the seeking work thing but at my partners fdr he suggested that if his ex was to bother working just 16 hours to maximise tax credits it could increase her income expecially as the youngest girl will be going to high school but judge indicated this wasnt really right to expect benefits to support her??? Gobsmacked because every women would claim that given the chance regardless of whatever amount was paid in spousal support because it isnt taken into account.... obviously a judges opinion varies from each court, I am thinking this is a post code lottery!!!

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  • LittleMrMike
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9 years 9 months ago #221495 by LittleMrMike
Replied by LittleMrMike on topic Re:Spousal Maintenance
Frankly, I suspect that most judges don't know the first thing about benefits .

LMM

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9 years 9 months ago #221521 by LittleMrMike
Replied by LittleMrMike on topic Re:Spousal Maintenance
You know, I was thinking about this and the attitude of this judge seems to me incomprehensible. It's almost like saying that a divorced wife who has an income should not claim tax allowances because it is a cost to the Exchequer, and then leave the ex husband to make up the loss to the wife.

The trouble is, most solicitors don't know much about welfare because, leaving aside salaried solicitors who work in advice centres, most people who need welfare advice could not, in the nature of the case, afford to pay for it.

Even in family law, where some knowledge of welfare is needed, the information in my textbook is very sketchy, when I compare it with the resources I had as a CAB bureau manager.

LMM

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