Should your maintenance payments change to reflect the reduction in your income? ask FLiP director James Pirrie
All over we seem to be facing warnings of reduced incomes to stave off more significant longer-term economic problems. Pay cuts and furlonging are being proposed to support the life of many businesses. Many of those facing reductions in their income have a range of financial obligations including paying maintenance to their former partner and/or their children. How should they begin to approach these discussions? Other couples who may be mid-negotiation, desperately trying to finalise a financial agreement, are now facing a moving target of a fair maintenance from an unknown income.
It is one thing dealing with maintenance claims where incomes have reduced, but quite another where you need to reach a long lasting settlement taking into account a future unknown change and long term uncertainty around income levels.
A crude approach might be to deal with the question proportionately:
- If someone was earning £200k net and was ready to pay £60k;
- But their earnings then halve… well why not halve the maintenance … to £30k?
Every situation is different, but the answer to this question may be “if I receive £30k but then you are left with £70k … it may be tough for you to cope on £70k not £140k but it is WAY tougher for me to manage on £30k instead of £60k”
In situations like these, it may be helpful to drag out of the toolbox (and yes of course a spreadsheet is available) the guidance given by the Honourable Mrs Justice Eleanor King in 2013:
“The proper approach would be for the District Judge to calculate a total figure for maintenance which covers what he finds to be [the claimant’s] ordinary expenditure together with such sum as would provide for … additional, discretionary, items which will vary from year to year and which are not reflected in [the] annual budget. Having carried out this exercise the court will then make a monthly order to be paid for from salary at whatever rate the District Judge feels to be fair, and the balance to be expressed as a percentage, of the net bonus up to a stated maximum each year.”
So what you need is to fix on three variables
- What is the basic minimum need;
- What is shared of the income above this;
- What is the cap.
The approach that may be helpful does not follow this structure exactly but we are able to use these principle to generate a scheme that may permit a discussion to promote a fairer sharing of the hardship – let’s call it “HvWplus”.
An example may help …
The straight proportions approach:
Say that the earner has £180k net and the right maintenance figure on that sum was going to be £65,000. If the income reduces and the maintenance reduces by the same percentage, the numbers reduce as follows:
This is the point described in italics above … the maintenance recipient in pink is probably feeling the pain of these reduced circumstances much more than the maintenance payer in blue.
The HvW plus approach might:
- So following the above example, this approach might work as follows:Have a basic number as a maintenance “floor”;
- Allocate the same sum to the earner;
- And then allocate a percentage of the surplus;
- Up to a cap …
Of course those key variables:
- The maintenance basic;
- The % share above;
- And the cap;
are all crucial and will need dialogue and working through.
There will be added complications as
4. Child support; and
5. Recipient earning capacity are factored in.
At least this is a methodology for sharing out the pain of reduced income in a way that may generate fairer outcomes… and outcomes that hopefully will not need enormous legal costs along the way (that will only exacerbate the problem).
At Family Law in Partnership our expert team of family lawyers, mediators and arbitrators can help if you despair about your chances of reaching an agreement whether in mediation, negotiation or if necessary arbitration or litigation. You may also find our variation of maintenance pages of help here.
For further assistance, please contact Family Law in Partnership director James Pirrie (E: email@example.com or T: 020 7420 5000) or contact any of our top London divorce and family lawyers on T:020 7420 5000 or E: firstname.lastname@example.org.