Listen to this article
I divorced my husband 20 years ago and was awarded a small amount to purchase a house for myself and our two young children — such a small sum that I had to take out a mortgage and work part time. The children are now adults, but I have a court order for life for a regular payment until I remarry or die — neither of which I intend doing any time soon.
My ex-husband, who is wealthy, took me to court seven years ago to stop my monthly payment of £836, but he dropped the case after the judge asked him to value his considerable assets. I am now in rented accommodation. Do I have a case to go back to court and ask for full and final settlement now I am approaching retirement age with very little pension to live on?
Sarah Balfour, a family law partner at Irwin Mitchell, says that whenever you have a question about a court order, the first thing to do is to go back to the order in question and re-read it.
The family courts generally deal with three types of claims — those relating to income (known as maintenance), those relating to capital (including lump sums and property transfers) and pension claims. Does your order dismiss your capital and pension claims? If not, the court may consider an application if you can show that you are in need.
From what you say in your letter, your claims for spousal maintenance are open. You appear to have a “joint lives” maintenance order. This means your ex-husband has to pay you a fixed sum (£836 per month) until one of you dies, you remarry, or the court makes an alternative order.
An order for maintenance is always variable. Either you or your ex can apply to bring it to an early end, as he attempted to do seven years ago, or either of you can apply to vary the monthly amount.
If you can show that you have behaved reasonably and maximised your own resources, but that the monthly sum paid to you is not enough to meet your needs then you may be able to increase it. The court will also consider whether your ex-husband can afford to pay you more.
If your capital and pension claims have been dismissed, you are not entitled to a “second bite of the cherry”, but you may be able to capitalise your claims. For example, you might be able to swap your ongoing entitlement to maintenance for a one-off payment.
You should always think carefully before returning a matter to court — the law in this area is discretionary, and there is a risk you will be unsuccessful and end up worse off. With these sorts of cases the court can make costs orders against the unsuccessful party. It’s also important to consider out-of-court settlement — will your ex agree to go to mediation?
Deciding whether or not you should vary or capitalise maintenance can be a tricky question. You will need to weigh up the pros and cons and you will need careful legal and financial advice.
Toby Yerburgh, partner and head of family law at Collyer Bristow, says you are the “lucky” recipient of a joint lives spousal order which entitles you to maintenance until you remarry, die, your ex-husband dies or there is a further order.
These are increasingly rare these days, as courts look to put a term on spousal maintenance orders. This aligns us closer to the position in most European countries and Scotland, where spousal maintenance tends to be limited to a couple of years at most.
That said, spousal maintenance is always variable on the application of either party. On a variation application, a court will look to achieve a “clean break” if possible, to bring the spousal maintenance to an end upon payment of an appropriate lump sum.
This is a two-stage process. The court will look to vary the maintenance figure up or down depending upon the circumstances. This will principally be based on your own and your ex-husband’s needs and financial resources. Once the court has settled on a figure it will look to see if this can be capitalised. This will depend upon there being free capital available to your ex-husband that the court considers can be used for this purpose.
The starting point for capitalisation in a case where there is a joint lives order will be the Duxbury tables, a set of actuarial tables used by family lawyers to work out the lump sum payable to replace a specific net income from spousal maintenance for a recipient of a specific age.
Among other things, these assume: constant drawdown; a 3 per cent income yield; capital growth at 3.75 per cent; a 3 per cent rate of inflation; and that you will use all of the income and capital and survive for precisely as long as the average for your contemporaries. For example, if a court decided to increase your maintenance to £15,000 a year to take account of inflation over the past 20 years and you were aged 65 at the time of the hearing, the Duxbury tables suggest you would need a lump sum of £128,000.
That said, if you could not persuade the court to increase the spousal maintenance figure from £10,000 a year, the starting point for the lump sum would only be £52,000. However, the court uses the Duxbury tables as a tool rather than a rule and is ultimately looking to achieve fairness. This could lead to an increase or a decrease in the lump sum payable depending on the circumstances.
Ultimately, though, you can see from the Duxbury figures that there would be a significant risk to you in making an application for a variation: lump sums at this sort of level will not generate anything like the £10,000 a year you are currently receiving.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to email@example.com
Our next question
I am in my early thirties and freelance for a number of companies. Until now I have structured my finances as a sole trader. However, as my earnings have gone into six figures, I have been made aware of the benefits of setting up a limited company. My wife and I own a valuable property together but neither of us has any pension savings. She is currently not working as we have young children. I would like to pay into a pension or Isa for her and understand that if she is a director of my company, this could be a good way of structuring our affairs. I am also aware of the IR35 tax changes in April that could complicate matters.
Get alerts on Marriage and divorce when a new story is published