In dealing with finances on divorce, the court has wide powers. It can make several different types of orders. The court can make capital orders, such as transfer or sale of property or for payment of lump sums. It can require the sharing of pensions. The court can also make spousal maintenance orders (technically called periodical payments orders) fixing the amount, the duration of the payment and whether that duration should be capable of extension. The court will look at each family situation on a case by case basis and may use any different combination of the various orders available to achieve a fair result.
In deciding which orders to use, the court must have regard to several factors as listed in the Matrimonial Causes Act 1973 (MCA1973). These include (and are not limited to) considering each spouse’s income, earning capacity and other financial resources; each spouse’s financial needs; standard of living enjoyed during the marriage; the age of each spouse and the length of the marriage.
The court must consider any children’s needs first. It must achieve a fair outcome. It must consider whether that fair outcome can be achieved by a clean break i.e. a mutual dismissal of spouses’ maintenance claims against each other.
In addition, there are long established legal principles the court will apply, derived from many cases which interpret the MCA1973. That interpretation changes over time. The courts also have a wide discretion as to how to achieve fairness, provided the factors in the MCA1973 are all taken in to account.
As stated, Interpretation and application of the law can change according to societal attitudes of the time. Whereas maintenance orders were a more commonplace solution previously, the current trend is towards a clean break, achieved over a shorter period of time, even where spousal maintenance is payable.
Child maintenance is a separate type of periodical payment, which in most cases is calculated by the CMS, not ordered by the court.
There is no specific blueprint as to when the court will order periodical payments. However, there must be a need for maintenance on the part of the recipient and an ability to pay on the part of the payer.
Payment of spousal maintenance may be applicable where there is a substantially higher earner and the proposed payee is currently not working, has a lower income and/or has low prospects of increasing their future earning capacity. How the parties divided contributions to the marriage (both financially and domestically) may be considered in these circumstances, as well as the length of marriage, the age of both parties, other income sources and the potential earning capacity for both parties.
Ultimately, the court will need to consider all the circumstances of the case and will aim to order what it considers fair. What role could Universal Credit play in this?
If your spouse is currently not working, they should explore in the first instance whether they are eligible for state benefits to maximise their income.
The introduction of Universal Credit in 2013 combined the following benefits into one benefits package (Universal Credit): Child Tax Credit; Housing Benefit; Income Support; Jobseeker’s Allowance; Employment Support Allowance and Working Tax Credit. It is anticipated that eventually everyone will be transitioned over to Universal Credit by 2024.
An award of Universal Credit is based on the claimant’s means and their financial resources. This is something a prospective payer should bear in mind if looking to agree (or resist) paying spousal maintenance, as any such payment would have to be declared to the Department for Work and Pensions (DWP).
In assessing a claimant’s Universal Credit award, the DWP looks at the claimant’s income and distinguishes earned income from unearned income.
Earned income is defined as remuneration or profits derived from employment; self-employed earnings; any other paid work; or, rather vaguely, any income treated as earned income for the purposes of Universal Credit.
Unearned income is all other income that does not fall into the above. It could, for example, comprise income from investments, interest on savings accounts and retirement pension income.
Spousal maintenance payments are considered unearned income. This is important to remember because unearned income reduces the monthly Universal Credit payments on a pound for pound basis.
This impact of spousal maintenance on Universal Credit will need to be considered carefully in the context of any financial discussions and Court proceedings. In practical terms, there might not be any real benefit to you making a spousal maintenance payment as your former spouse would not receive any additional income, as a result of the reduction to Universal Credit.
Looking at it another way, spousal maintenance only makes sense where the amount of payment to be expected is more than the estimated or actual award of Universal Credit.
Child maintenance is disregarded in the calculation of income for the purposes of Universal Credit. This is irrespective of the amount of child maintenance paid, so long as the whole amount is child maintenance.
It may also be possible to pay towards the payee’s other liabilities, without affecting Universal Credit, although care should be taken to disclose any such arrangement to DWP to avoid difficulty.
If your spouse receives Universal Credit, we can assist you in choosing the right solution to suit your circumstances. Please contact a member of the Family team for further information.