Should you wish to discuss, in strict confidence, any of the issues raised in this article, please contact the author, Sarah Jackson on 01225 462871, or email her at firstname.lastname@example.org.
The issue of spousal maintenance is an emotive one; it can grab headlines such as “Wife told to get a job” in the recent case of Wright v Wright and, from my experience, can be one of the greatest stumbling blocks to resolving disputes on divorce. I would therefore urge anyone considering divorce or separation to get early advice on this issue.
It is a sad fact that when a couple move into separate homes there is usually less money to go around as there are two households to run instead of one. As a result, many people find themselves in a precarious position financially during the divorce process. One party – usually the wife – may not be working or have a very low income due for example to their role as the children’s main carer and be unable to meet the outgoings on their property. The other, the higher earning spouse who previously made sure the mortgage and bills were being paid, may be reluctant or unable to afford to continue to do so and may withdraw the support.
The questions to be answered are “How much maintenance, if any, should a higher earning spouse pay to the other on divorce?” and “For how long?”. This article attempts to answer these questions and more on the thorny issue of spousal maintenance.
What is spousal maintenance?
Spousal maintenance is maintenance paid by a husband or wife to their former spouse following a divorce. It is also known as “spousal periodical payments”.
It is entirely separate from child maintenance.
Spousal maintenance is usually paid on a monthly basis and can be set for a limited period of time (a term of months or years) or until one of the parties dies (known as a ‘joint lives order’). However, spousal maintenance on a joint lives basis is increasingly rare as the court’s objective is that there be a transition to independence for the receiving spouse.
Spousal maintenance ends if the recipient remarries or if either party dies. It may be varied or dismissed by the courts if there is a change in the parties’ circumstances.
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What is the difference between spousal maintenance and child maintenance?
Spousal maintenance is paid for the benefit of the recipient spouse and is determined with reference to the recipient’s income, needs and earning capacity as well as the paying party’s ability to pay. The court can also decide on child maintenance (periodical payments orders for the benefit of children), but in very limited situations only.
Otherwise, child maintenance is dealt with by the Child Maintenance Service (formerly the CSA) and is calculated with reference to the paying parent’s gross income only; the recipient spouse’s income, needs and earning capacity are irrelevant.
For more information on child maintenance and the Child Maintenance Service, see my previous post “Child Support becomes Child Maintenance – more than just a name change”.
Spousal Maintenance – the law
The court may make spousal periodical payments orders on or after a decree of divorce, nullity or judicial separation (Section 23(1)(a) and (b), MCA 1973.)
When deciding whether to make an order, judges are required by statute to consider all the circumstances (section 25, MCA 1973) and, if a periodical payments order is made, whether it should last only until the recipient adjusts, without undue hardship, to the termination of their financial dependence on the paying party (section 25A(2), MCA 1973).
The equivalent provisions for civil partnership cases are contained in Schedule 5 to the Civil Partnership Act 2004.
A lack of clear guidance from the courts on the issue of spousal maintenance led the Law Commission in its report in 2014 to set out some guiding principles at paragraph 3.92 onwards. Then in a recent High Court case Mostyn J, having considered the applicable case law and views of the Law Commission, pulled together 11 applicable principles in respect of spousal maintenance which you can find at paragraph 46 of the judgement.
Would the court order spousal maintenance in my case?
I find that it is a popular misconception amongst my clients that income should be shared on divorce in the same way that assets are shared. In fact, except in exceptional cases, spousal maintenance is generally only paid where the non- or lower earning spouse cannot support themselves financially without it.
It is not a case of ensuring that separating spouses have parity of income. Instead the court will look firstly at whether there is a shortfall between how much the non- or lower earning spouse needs to live on and their income from all sources (including what they could potentially earn and receive by way of tax credits) and then at the higher earning spouse’s ability to bridge the gap.
In some very rare situations, a recipient may receive more spousal maintenance than they need to support themselves if they have, for example, given up a highly-paid career to bring up children.
If so, how long for?
A spousal maintenance order may be made for life (i.e. until one of you dies or the recipient remarries) or for an extendable term or for a non-extendable term.
When deciding how long a spousal maintenance order should last, the court’s aim is for there to be a clean break at the earliest opportunity. To this end the court will look at whether, and if so when, the recipient spouse can adjust to the end of financial dependence and will consider what evidence there is to support the expectation that the recipient can and will become self-sufficient.
A thorough investigation of the recipient’s earning capacity, eligibility for benefits and re-training options is therefore crucial in determining how long an order for spousal maintenance should last.
Spousal maintenance calculator
There is no set formula for the calculation of spousal maintenance as there is for the calculation of child maintenance. This is what makes this issue so difficult.
However, as a starting point I suggest that you carry out the following calculations:
- Calculate the current income needs / reasonable outgoings of the lower earning spouse;
- If the lower earning spouse is also the main carer of children, calculate the higher earning spouse’s child maintenance liability using this calculator as a guide;
- Deduct from the lower earning spouse’s income needs their actual income including any child maintenance payable;
- If there is a shortfall between the lower earning spouse’s income needs and actual income, calculate the higher earning spouse’s disposable income – income after all outgoings including child maintenance;
- Look at whether the higher earning spouse’s disposable income is sufficient to cover the lower earning spouse’s shortfall;
- Look at whether the lower earning spouse’s income can reasonably be increased – by working more hours and/or claiming tax credits;
- If so, work out how soon the increased amount could be received; and finally
- Look at whether the lower earning spouse could reasonably reduce their outgoings – for example by moving to a smaller property – and the time frame for doing so.
If you conclude that there is a shortfall between what the lower earning spouse needs and their current income, which the higher earning spouse can reasonably afford to meet, then you may decide to agree spousal maintenance on this basis, at least in the short term. However, if the lower earning spouse can cover the shortfall themselves by increasing their income and/or reducing their outgoings in the immediate future, you may decide that spousal maintenance is not required.
If the lower earning spouse is able to increase their income and/or reduce their outgoings in the future but needs a period of time to make appropriate financial adjustments, you may wish to limit the length of time (term of months or years) of spousal maintenance and/or reduce the amount paid in stages.
Please, however, ensure that you take specialist legal advice before reaching a final agreement.
Maintenance Pending Suit
“Maintenance pending suit” is spousal maintenance paid while a divorce is pending (i.e. between the issue of a petition for divorce or judicial separation until the grant of decree absolute).
If you are newly separated and your spouse has stopped paying your overheads with the effect that you are unable to make ends meet, you need to get urgent legal advice. It may be that you need to issue a petition for divorce and apply for maintenance pending suit without delay.
Whether you intend to apply or you have been served with notice of your spouse’s application for maintenance pending suit, it is crucial that you seek specialist legal advice at the earliest opportunity as there are different costs rules for maintenance pending suit applications than for other family law applications, with the result that you could end up paying your opponent’s legal costs as well as your own.
Capitalising spousal maintenance
The court will always make a clean break order if it is possible to do so. Therefore if the lower earning spouse is entitled to spousal maintenance, the court will look to see if the payments can be ‘capitalised’ (i.e. paid by way of lump sum order in lieu of on-going maintenance) so that the couple can have a ‘clean break’ from one another financially.
Equally if you already pay spousal maintenance to your former spouse, or they pay it to you, either of you can apply to the court for this regular payment to be ‘capitalised’ at any point.
Often solicitors will calculate an appropriate capital sum using ‘Duxbury tables’. These tables allow the capitalised total lump sum to be calculated by reference to sex, age and the level of annual income needed. The calculations are based on predictions and approximations of income yield, capital growth, inflation and life expectancy. However, over recent years the use of Duxbury calculations has been questioned by some professionals who consider that they produce unrealistic results. An alternative is to instruct a financial adviser to calculate an appropriate capitalisation.
A further word of caution regarding capitalisation concerns the potential remarriage of the recipient of spousal maintenance. If a recipient of spousal maintenance remarries, spousal maintenance stops. It is important therefore that the paying party thinks carefully about a recipient’s remarriage prospects, and thoroughly investigates whether they have any plans to remarry, before agreeing to capitalise their spousal maintenance claim. It is sobering that in a 2008 case a former husband was unsuccessful in his attempt to recover monies paid by way of a capitalisation of spousal maintenance when his former wife remarried soon after the lump sum had been paid. He had suspected at the time that she was cohabiting with the man whom she went on to marry but she had categorically denied having any intention to cohabit or marry and the court accepted that her plans did not change until after the lump sum had been paid!
What is nominal maintenance?
A nominal spousal maintenance order may be made in favour of one party where they currently have sufficient income to meet their needs and no substantive spousal maintenance is required at present, but may be needed in the future.
Nominal spousal maintenance orders are most commonly granted in favour of a parent with main day to day care of children as a safeguard against any significant change of circumstances in the future, such as redundancy, rendering them unable to meet their financial needs. In this eventuality they could then apply to the court to vary the nominal order upwards to a substantive amount.
However, in a recent 2013 case, the Court of Appeal made it clear that nominal spousal maintenance should not be ordered as a matter of course in such circumstances and upheld the decision of a trial judge to make a clean break order even though the children, living with the wife, were aged 3 and 6 only. The wife was the higher earner though, and it was a very short marriage.
Future bonus payments
Where a higher earning spouse receives a base salary and a discretionary bonus, the approach of the courts seems to be to ensure that the lower earning spouse’s needs are met out of the base salary and that additional discretionary items, which do not appear in the lower earner’s annual budget such as holidays, are met from the bonus on a capped percentage basis.
The correct percentage and cap are decided on a case by case basis, but by way of illustration in one recent case the wife was awarded 25% of all future bonus’ capped at £20,000 per annum and in another case the wife was awarded 20% of future bonus’ capped at £26,500 per annum.
Protecting spousal maintenance payments
One final point to consider is how best to protect your maintenance payments in the event of the paying spouse’s death or critical illness.
My strong recommendation is that you consider insuring the payments so that the receiving spouse continues to receive an income if the paying spouse dies or becomes critically ill. To do this, either of you can take out a life insurance policy on the paying spouse’s life.
Some of my clients prefer instead to look at the option of the paying party giving an irrevocable nomination to his employers for the receiving spouse to receive his death in service benefits in the event of his death while maintenance is in pay. However, at the risk of stating the obvious, it is important to remember that death in service benefits stop if the employee leaves their job. If you have no other life insurance in place, therefore, the receiving spouse will be vulnerable if the paying party switches jobs, is sacked or made redundant.