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:
http://www.uk-legislation.hmso.gov.uk/RevisedStatutes/Acts/uk
pga/1973/cukpga_19730018_en_1On 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 (http://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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England and Wales 
