Archive | child maintenance

How much child maintenance should I pay?

How much child maintenance should I pay?

Two kids x 20% gross income, err, less pension payments, and then, erm, divided by 3 nights equals… Damn. Start again.

Two years ago I launched a child maintenance calculator to deal with the vexed question:  “How much child maintenance should I pay?”  The reasons I took the time out to develop this free tool are set out here.  It’s fair to say I had the hump with the Child Maintenance Service, on behalf of parents struggling with the issue of child maintenance, at the poorly executed calculator provided by that organisation.

I am not able to spend as much time on this blog as I used to; I felt some years ago that my spare time had to benefit as many people as possible and that I should concentrate my efforts on a more ambitious way to help people connect with specialist family law advice.  I put it all down to a numbers game.  I have been very busy with those long-term plans aimed, a wee bit ambitiously, at bringing family law into the 21st century.  So, being distracted by grander plans, I was pleasantly surprised to see that there have been 900 calculations using my child maintenance calculator.  Most of the calculations were carried out by private individuals, but with a sizeable number generated by lawyers, mediators and some advice agencies.

I will continue to host and maintain the calculator as long as it meets a need.

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Child maintenance and cohabitation should not be linked

 

Postbox

 

My virtual postbag brings me a question from P: a common question about the relationship between the payment of child maintenance and cohabitation.   P obtained a consent order dealing with financial matters arising out of divorce.  The only problem being that her ex has interpreted the terms of the consent order in a way that has a detrimental financial impact upon P.  She tells me:

“Paragraphs 2&3 are relevant. My ex-husband believes that because I have been cohabitating with my new partner for 12 months (2c) he has no legal obligation to pay child maintenance (paragraph 3).”

There is often confusion on the part of maintenance payers between spousal maintenance and child maintenance.  Spousal maintenance is paid by one spouse to the other after divorce.  Lawyers refer to it as spousal periodical payments.  Let’s have a look at the relevant paragraph in P’s consent order that requires her ex to pay her spousal maintenance:

screenshot of consent order

 

OK.  So we can see here that there is a reference in paragraph 2 c to P’s spousal periodical payments terminating in the event that she cohabits with another for a period of 12 months.  Cohabitation with a new partner can be a common terminating event for spousal maintenance.   Let’s then look at an entirely separate paragraph dealing with child maintenance (referred to as periodical payments):

 

screenshot

 

The order requiring P’s ex to pay child maintenance to her for the benefit of their child is entirely separate (as I would expect) from the paragraph dealing with spousal periodical payments.  The payments of child maintenance cease when the child reaches age 18 or ceases full time secondary education.  The payments of child maintenance DO NOT CEASE if P cohabits with another for a period of 12 months.  Unfortunately, P’s ex has misunderstood the terms of the order.  He has linked the child maintenance and cohabitation.  It is P’s spousal periodical payments that have ceased (or will cease) upon 12 months of cohabitation.  This has nothing to do with child maintenance.  But that misunderstanding has a serious financial impact upon P’s child.  The payment of child maintenance and cohabitation are not linked in this consent order.

Perhaps P could refer her ex to this blog post so he can see how the confusion has arisen.  He should then reinstate the payments of child maintenance for his child.  At the end of the day, these payments of child maintenance are not for P’s benefit but for the child.

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Child maintenance charges

 

Child maintenance charges

GOODBYE CSA – HELLO CHILD MAINTENANCE SERVICE

I hear the Child Maintenance Service has written to 50,000 single parents currently using the Child Support Agency (CSA) to warn them that if they cannot reach a new voluntary agreement they could face child maintenance charges for using the CSA’s replacement service.  The BBC’s report is here.

Child Maintenance Charges – in summary

The new rules mean that if a voluntary arrangement cannot be reached then:

  • The paying parent  will have a 20% charge added to the maintenance payment;
  • The receiving parent will pay a 4% charge to receive the child maintenance;
  • All parents will be charged a fee of £20 for registering with the new service.

Voluntary Agreements for child maintenance

Obviously, it is best to agree the level of child maintenance and to avoid having to face a child maintenance charge.  All this does is reduce the value of the payment that is meant to be benefiting the children.  This is a form of indiscriminate taxation as far as I can see it.

One of the problems with expecting parents to reach agreement between themselves is that the government has been slow to provide the necessary information and the appropriate tools.  If you are a parent who has received such a letter or you are recently separated and unsure about how to agree child maintenance then have a look at the Child Maintenance Options site.  BUT IF YOU FIND THEIR CHILD MAINTENANCE CALCULATOR UNHELPFUL THEN HAVE A LOOK AT MY CHILD MAINTENANCE CALCULATOR INSTEAD.  I think you will find it a lot more useful and the calculation produces a PDF which you can print out for your ex or email to them instead.

 

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Why I created a child maintenance calculator

Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows

Everybody Knows“, Leonard Cohen

About 10 months ago I became annoyed with the very basic child maintenance calculator provided by the Child Maintenance Agency (CMA) and decided I could copy it, refine it and then, greatly improve it.

Sure, the CMA’s calculator carries out the calculation but it lacks real thought, care and class. It introduced a new formula – that based on gross income – that was not as easy to understand as I first thought. In fact, in places, it was quite complicated.  It introduced nil, flat, reduced, basic and basic plus rates.  It no longer became the sort of calculation you could quickly scribble out on a piece of paper.

Sometimes, life is complicated but in my humble opinion, if a government decides to make something as important as child maintenance complicated it has an obligation to make its delivery to its citizens as understandable as possible. The CMA’s  online calculator is not good enough for such an important function. So, at first, I was just irritated at the lack of care in the delivery. I could not see how such a basic calculator could help parents to communicate about the appropriate level of child maintenance. The child maintenance result was not explained; it could not easily be emailed or otherwise electronically communicated to the other parent.   Because the calculator did not care to explain itself, its results could not easily be queried by the parents who needed to understand its workings in order to reach agreement.

So, I decided to take the child maintenance calculator and make it better. It proved to be very time-consuming. I wanted to give up quite a few times, frustrated at my inability to make the damn thing work and as the months passed I started to become less Mr Mardy Bum and more Mr Angry.  To be honest, if it wasn’t for getting the right hump I would not have finished this calculator.  But my beef was not with my stumbling efforts at coding but rather with the attitude demonstrated by various ministers responsible for key policies.

Why so angry?

So, why did feeling angry with the government’s treatment of families make me even attempt to build a child maintenance calculator?  Here’s why, quickly:

  • It was abundantly clear that the government would withdraw family legal aid anyway despite the warnings from most respectable quarters about the adverse impact on vulnerable families;
  • The government held up mediation as the panacea: withdrawing legal aid would matter not a jot we were told.  But in its wisdom, the government thought it unimportant to highlight the fact people could still get means-tested legal aid for mediation. I mean, really let them know: spend a small amount of the millions that would be saved publicising the availability of legal aid for mediation. The result was a policy car crash; mediation referrals fell off a cliff.  Litigants in person, unable to afford legal help have flocked to the courts – the very outcome the government was trying to avoid.
  • Even before family legal aid was knifed in the back in April of last year, high street solicitors’ firms were disappearing from the high street faster than my mum’s scones as soon as they came out of the oven. It suddenly became impossible for a very significant part of the public to get legal advice at at time when their families were in crisis.
  • The family courts are reeling from successive budget cuts. The public counter service intended to help the public used to open between the hours of 10.00 am to 4.00 pm.  Then it was reduced to the morning only.  Now, it doesn’t really exist at all.  You have to make an appointment if you want to see someone at the public counter. Think about that. You have to phone up the court (hoping the phone gets answered) and make an appointment. But if you want to make a court application you have to do so by post.  You can’t just drop it off at the court like you used to.   Such court applications by litigants in person are, understandably, often incorrectly drafted. They are then sent back by the court. In the days of access to a public counter you could at least go in with the papers and have the usually helpful staff at least iron out the worst mistakes and try to put people on the right track. To believe you could actually walk into a court to seek help. Literally, have access to justice.  The court service is no longer a service to all its citizens. It discriminates against those who are poor or of modest income who cannot afford legal advice.
  • Allied to the policy decision to deprive the poorest citizens of legal advice is a wholesale reform of the welfare state that has driven more children into officially defined poverty. A cabinet defined by high privilege knowingly consigns the poorest and youngest amongst us to the direst of life outcomes.  I find that unforgivable.

All in all, I just get the strongest impression that the government doesn’t give a toss.  It is an abdication of responsibility by the state to enact such policies and hope that the private sector will come up with the answers.  It may deliver some solutions but it will, inevitably, be driven by the bottom line: it will cherry pick those citizens it is interested in and filter out the rest.  The not for profit sector will soldier on but comes under an increasingly heavy burden.

For individuals to do nothing in the face of official indifference is as much an abdication of responsibility as that being demonstrated by the state. So, as a lawyer, like many others, who believes that access to justice is a fundamental principle that must be protected I have to do something rather than nothing.  Partly, that is why I started this blog, rather than going back to, say, the voluntary CAB roster of many years ago.  I realised that I could reach more people in one day using my blog than I could in a whole year of once a month voluntary sittings at CAB.

And this is why my small, further effort at doing ‘something’ rather than ‘nothing’ led me to create a proper child maintenance calculator to help parents towards that difficult conversation about money.  To allow parents to communicate more easily about the appropriate level of child maintenance in circumstances where they no longer have the assistance of lawyers, the courts or the state.

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Inheritance Act Claims

 Inheritance Act 1975

My virtual post bag brings me a very sad enquiry involving potential Inheritance Act claims. I will refer to my enquirer as ‘C’ – who tells me:

My ex husband died by suicide a couple of weeks ago, I have custody of our 2 children 14 and 16 years old. We had a maintenance agreement for many years, however last year he lost his job so my maintenance payments stopped. However in our divorce/maintenance papers it states that a provision has to be made in his will to support his children should he die.

Now I have never seen his will and have no idea what it states or even if there is a will. He remarried a few years ago. I nor my children has NO relationship with his wife to the point where his children have not been invited to his invitation only funeral. Due to the lack of maintenance for the past year I have no funds to engage a solicitor to help me, so I have been reading as much as possible online where I came across your site. How can I

1) Find out if a provision in his will for his children has been made

2) What can I do if there is no provision or will?

I know you cannot give me personal advice but any suggestions of where I can start would be gratefully received.

What an awful situation for all involved.  It is particularly sad to read that C’s children will not have the opportunity to say goodbye to their father at the funeral. The death of a parent at their age will be very hard on them and the particular circumstances of the death doubly so.  I sincerely hope that the children will be able to make their farewells in due course in a manner appropriate and helpful for them.  C and her children may obtain assistance from the Childhood Bereavement Network which has a helpful directory of local services across the country.

Inheritance Act Claims

As C recognises, I don’t provide legal advice on this blog.  And, in this case, as in so many others, I am not in possession of all the information.  But I can make observations of a general nature which may help C, her children, and others who find themselves in similar positions.  It is likely that a number of potential Inheritance Act claims arise.  By Inheritance Act, I am referring to the Inheritance (Provision for Family & Dependants) Act 1975.  Have a look at my previous post on a query involving the Inheritance Act for more details.

  • It appears that that both C and her children could have Inheritance Act claims. But, in relation to C, she may only make a claim if she has not re-married. C may claim because she is an ex-spouse of the deceased who had the benefit (even if not being paid) of a spousal maintenance agreement still in existence at the point of death.  The children had child maintenance agreements of some sort.  It is, of course, very important to know whether the maintenance agreement was a private arrangement between C and her ex (perhaps in the form of a deed) or whether the family court gave an order, even by consent, setting out the terms of the maintenance payments.
  • The fact that the deceased may not have been making payments before and at the time of death does not stop C making a claim on her own behalf as a dependant.
  • C’s children, being minors, would need a Litigation Friend (someone who can step into their shoes for the purposes of legal proceedings) in order to take advice about any possible claim or to ask solicitors to take steps on behalf of the children in any court proceedings.  It is likely that C could also act as Litigation Friend in any proceedings on behalf of her children.  There can sometimes be a potential for a conflict of interest between a parent who is claiming against an estate and that parent’s children who are also claiming.  This may mean in some cases that there are separate solicitors for the ex-spouse and her children.  And the Litigation Friend may be another relative who can exercise judgement independent of the parent.
  • Whilst the court may allow Inheritance Act Claims to be brought, it does not mean that they always succeed.  Crucially, much will depend upon the size of the deceased’s NET estate (i.e., what is left after all the debts have been paid).  If it is relatively small, it follows that there will be little to go around and a court may be reluctant to interfere with the Deceased’s Will by diverting funds away from the widow and towards an ex-wife.  The children’s financial position would, however, still deserve serious consideration even in a small estate.
  • Whether a claim will be successful does not just depend upon the value of the estate.  The court will have to look at the circumstances of C, her children, as well as the widow, and any other beneficiaries under a Will who may lose out if C makes a claim.
  • C is not sure if her ex had a Will.  The quickest way to find out (but I’m not saying it’s the easiest) is for someone to ask the widow.  I have no idea if the relationship between C and the widow is a good one.  Let me guess, from what C tells me, that the relationship is poor or non-existent.  But the widow could be asked, perhaps sensitively by a third party if necessary, about the Will.  But, otherwise, I’m going to presume that C will get little or no information or response from the widow and therefore has to consider how best to protect herself and her children.
  • C tells me that in the “divorce/maintenance papers” it states that provision had to be made in the deceased’s Will to support his children in the event of his death.  I haven’t seen the agreement (or the court order if this is what it is).  It is possible to give an undertaking (a form of solemn legal promise) to make provision in a Will for somebody else on certain terms.  Such provision may even be irrevocable – that is, once you have made the change to your Will, you can never undo it.  If you tried to undo it or, after your death, your estate tried to retreat from your undertaking, the person or persons with the benefit of the undertaking can apply to the court to enforce that benefit.
  • I don’t know if the provision agreed to be made by the deceased in his Will was for a specified amount for the children – it it was for a specific sum and the Deceased’s last valid Will does not contain this provision then at the very least, the children should recover that sum from the estate.
  • C needs to find out if her ex has a valid Will.  The deceased re-married of course, which would have had the effect of revoking his prior Will (unless it was drafted in a certain way).  I wonder how many people know that?  So, there is the possibility that the deceased made the provision in his Will, as agreed with C, for his children, but then re-married without being aware that he had revoked his Will.  So, after the remarriage, it is to be hoped that the deceased then made a new Will and remembered to include the provision for his children.  The question is whether that provision is reasonable.  If the NET estate is worth £100,000 and he has left £100 to each child, it may be imagined that a court would not regard that as being “reasonable provision”.
  • But what if C’s ex did not make a new Will after re-marriage?  In this case there would be an intestacy.  The present rules on intestacy mean that ex-spouses do not benefit at all.  Children will only benefit if the estate is worth £250,000 or over.  If the estate is worth less than this then only the widow will benefit.  But remember that Inheritance Act claims can be brought where the operation of the intestacy rules means that reasonable provision will not be made for a claimant.  So if the deceased estate is intestate, and is worth less than £250,000 meaning the children get nothing, they can claim under the Inheritance Act.  As can C.
  • One issue that can arise is the value of the deceased’s home.  If it is jointly owned legally and beneficially with his widow then upon his death the property would be automatically transferred into her name.  If this is news to anyone then have a look at my post explaining the crucial difference between beneficial joint ownership and a tenancy in common.  If the property has automatically been transferred to the widow by the death of the deceased, then its value (which may of course be significant) will not appear in the NET estate.  It is possible in certain circumstances when applying under the Inheritance Act, to ask the court to exercise its powers under Section 9 of the Act to bring the value of the property belonging to the deceased (nominally 50%) back into his NET estate so any claimants can have their claims satisfied.

Next steps for C?

It would be prudent for C to consider the following action:

  1. Contact the widow, preferably in writing  so there is a dated record, to enquire about her ex’s Will and the provision that has  been made for the children, as previously agreed, and putting the widow on notice (respectfully and politely) about C’s possible claim as a dependant.
  2. If the children are beneficiaries under any valid Will, then the executors must let C (as the parent) know that the interest is in place and the value of any specific legacies (a fixed monetary sum or item of property).  If the interest is in the residue of the estate (what is left after all the debts are paid and the specific legacies have been met, then C will be informed in due course.  It is likely that the ex will have left the residue of the estate to his widow but, again, I simply don’t know.
  3. Straight away, C should look back at her divorce papers to see what record she has of her ex’s pensions and the addresses of the trustees or administrators.  I don’t know whether C had any pension sharing orders or not at the point of divorce.  In most pension schemes it is possible to make a nomination of a spouse or children to receive death in service benefits should you die before receiving your pension.  Although no longer a spouse, C should advise any relevant pension schemes of the existence of her minor children in case her ex made a nomination to their benefit.  Even if her ex did not make such a nomination, pension trustees can exercise their discretion in favour of spouses (probably not ex spouses but you don’t know if you don’t ask) and children.  This step needs to be taken quickly in any event.
  4. The suicide may have invalidated any insurance policies – I don’t know.  But in some cases, parents who have to pay maintenance agree to take out insurance to cover the loss of the payments in the event of their death.  This agreement would normally be detailed in a court order.  If such an agreement, and a subsequent policy, is invalidated by the suicide, then it should act to strengthen the likelihood of successful Inheritance Act claims, provided there is still a reasonable amount of value left in the estate.
  5. C can make an application for a Standing Search of the probate registry.  This will tell her when an application had been made and granted for her ex’s estate to be administered, either under a Will or under the intestacy rules.  If an application has been made, C will receive a copy of the Grant and a copy of the Will.  It is unlikely that a grant will have been applied for already but the usefulness of the standing search is that it stays in place for 6 months so if a grant is given in the next 6 months, C will find out about it.  C can renew her standing search for a further 6 months each time.  C has six months from the date of the grant of representation to make any claim against the estate.  A claim outside of this time may not be successful.  This is called a limitation period and should not be ignored.  The standing search is a nominal fee – £5.00 the last time I had to use it for a client.
  6. C should try to obtain legal advice.  This area is complicated but C may be able to get a free consultation with solicitors local to her.   C will have to make sure that they have experience of Inheritance Act claims.  If it appears that there is a potential claim on C’s  behalf and/or her children, her lawyers may be able to obtain funding from a litigation provider or may be prepared to fund the case and take their fees at the end if it is successful. As far as I am aware, there is no longer any legal aid funding for such cases so it is necessary to think through what other funding options may be available.  Although legal aid is  still available for mediation, I have not heard of many mediators dealing with Inheritance Act claims.  Even the mediators who are also family lawyers, probably have little experience of Inheritance Act disputes.

I hope this post provides C with some assistance.

 

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Divorce calculator for simple interest

 

Divorce calculator simple interest

 

As I confessed in an earlier post, I can’t resist a good divorce calculator.  I was talking then about a divorce calculator for journey costs.  The thingymajig  below calculates simple interest on a given sum. I know, you could probably do the maths in your head, but in a lighthearted way, I want to highlight the usefulness of interest in divorce and separation cases.

 

A divorce calculator for interest

 

  • In a divorce settlement, your spouse may offer to pay you a lump sum.  The lump sum may be to compensate you for, as an example, transferring over the interest in the matrimonial home.  But the problem is, your spouse says you will will have to wait for the whole sum or part of it.  If you agree to wait then the money is not sitting in your account earning interest.  Yes, I know that savings rates are rubbish but, in the legal world, cash is king.  If I am going to agree to my client waiting to get their hands on an agreed lump sum I will ask for interest at the court rate.  That, by the way, is 8%.  Yes, I do mean 8%.  If you can find a savings account offering anything near 8% then I’m a monkey’s uncle.  So demand interest.
  • You have separated from the partner of your children.  You want to agree child maintenance.  You realise that inflation will eat into the value of the payments as time goes by.  So, you agree to increase the payments on an annual basis by a set percentage.  The figure is up for agreement although you can of course vary it each year.  Inflation last year was 2.7% so you would want to agree at least 3% to keep pace with inflation.
  • In a divorce or a co-habitee separation one of the parties pays off a joint debt.  It is agreed that half of the sum paid out will be reimbursed but there is a worry that the commitment to repay may fade with time.  You can agree to apply a relatively high rate of interest on the unpaid sum so there is an incentive not to delay payment.  Example: John has a credit card debt of £7,000.  It is agreed with his ex-partner, Sue, that at least £6,000 of that sum was for joint spending.  John agrees to pay off the whole sum but Sue will owe him a ‘credit’ of £3,000.  Sue does not seem very focussed on when or how she will re-pay John the £3,000.  So, before paying off the credit card liability, John and Sue agree that he will be paid back the £3,000 within 28 days.  But in the absence of payment at day 28, interest will run at 8% until it is paid off.  Sue therefore needs to get a move on.

I will try to track down some other calculators that I think might be useful in a family law situation. Don’t knock it – it keeps me off the streets.

 

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Financial planning in family law cases

 

Family lawyers should import financial planning

Family lawyers should import financial planning advice

I still surprise some of my clients, sitting in front of me with a pressing need for legal advice on a family law matter, when I take an avid interest in the identity of their other professional advisers and enquire about the financial planning that I expect to see in place.  I suppose they expect me to launch into questions about unreasonable behaviour or compromising comments on their spouse’s Facebook timeline.

I’m always surprised that they are surprised.  I wouldn’t dream of dealing with, say, a client who is facing divorce proceedings who owns a business, without talking to his or her accountant or financial planner.  I will want to understand how the business, and the family unit, ticks and how both may be affected by the advice I will be offering.

As a family lawyer dealing with divorce, civil partnership or separation issues I always have one eye on the financial planning issues that will arise in a case.  When I refer to financial planning, I do not mean sitting down with a divorce client and simply subtracting the outstanding mortgage from the value of the matrimonial home to work out the net equity.  No, I mean something much more sophisticated and, in general terms, beyond the skill set (and regulatory authority) of lawyers.

I will set out just a few examples.

Financial planning in divorce and civil partnership dissolution

With the exception of the most straightforward of divorce cases, perhaps one where there are no children or little or no assets, I would look to import financial planning advice for my clients.  The following scenarios are familiar ones:

  • The family home may need to be sold but this will involve exploring realistically the mortgage capacity of each spouse.  How much can be borrowed and what would be taken into account by a mortgage lender as income?  Will bonuses count?  If a wife is to receive maintenance payments from her husband after divorce, will this count as income in her name and improve her ability to obtain a mortgage advance?  
  • How much money will there be to live on: now, in five years’ time, or at retirement?  When family lawyers sit down with their clients to complete financial disclosure they need to detail all the outgoings their client will face.  Speaking frankly, for most lawyers, this has always been a bit of a chore.  There’s nothing exciting about working out utility costs or the public transport costs for your client to get to her new job.  Where’s the law in that?  So it tended to be done in a pretty slapdash way.  But this exercise is crucial.  The outcome impacts directly upon your client’s quality of life after divorce. It deserves some time and attention.  Financial planners use fairly sophisticated cash flow software that models the fluctuations in income and outgoings for clients over a long period of time.  In other words, they properly plan for the future.  This data is invaluable for the family lawyer who wants to negotiate the best outcome for their client in any divorce settlement.
  • Never mind the family home, what about the pensions?  How many times have I had a client say to me: “My husband says it’s not worth bringing pensions into it. We should ignore them”.  It is surprising how often pensions appear to be ignored.  I don’t ignore them.  I have them valued and then I decide whether they can be ‘ignored’.  Pension valuation can be difficult.  And let me make one thing clear.  £100 of pension funds for a female client is not the same as £100 for a male client.  You see, women live longer (just have a look at the figures kept by the Office for National Statistics).  So that £100 for a woman has to stretch further.  In simple terms, it will not yield as much income in retirement.  And here is another common refrain: “My husband says we should split the pensions in half.  That’s fair”.  Well it’s sounds fair, but it probably won’t be in the long run.  Any family lawyer who fails to obtain advice from an appropriate expert, such as a financial planner, with the relevant pension expertise, is selling their client short.
  • Maintenance payments for a spouse or children may have been agreed.  But what happens if the payer of maintenance dies?  I don’t understand why more lawyers don’t obtain advice for their clients on cost-effective insurance policies to pay out in the event of death.  This solves any cash flow problems for the ex-partner who would otherwise struggle with the financial burden of any children of the marriage.  And it also helps to prevent claims against the estate of the deceased under the Inheritance (Provision for Family and Dependants) Act 1975.

Financial planning for cohabitants

  •  The law in England and Wales does not provide adequate protection for couples who have cohabited, in some cases, for many years, and even had children.  Living Together Agreements can provide a sensible financial planning exercise for the relationship ahead.  It is particularly important where property may only be owned by one party or there is a common purchase but with unequal monetary contributions.  It is crucial for Wills to be put in place if proper provision is to be made for the other partner.  It is also possible to put in place nominations for death benefits under certain pension entitlements.  Life insurance, again, can become a sensible step to take to ensure that untimely death does not leave partners or children in the lurch.

I am fortunate in my day job as I can call upon my colleague, Sam Jermy, a financial planner, to help my clients.  The need to import financial planning advice is so integral to the family legal work that my firm undertakes that we formed a joint venture with a firm of chartered financial planners.  A free initial consultation is perfect to identify the issues that I need to concentrate on in obtaining the best outcome for my clients.  I appreciate that not everyone has access to a chartered financial planner.  But, if you find yourself encountering some of the issues raised in this blog post, ask your lawyer if financial planning advice is needed.  Don’t leave it until the doorstep of the court or the drawing up of the negotiated settlement – an opportunity for prudent and informed financial planning will have been missed.

STOP PRESS: I’m pleased to announce that Sam Jermy, a financial planner with Family Law Financial Planning, has offered some guest blog posts on the financial planning  work he conducts with family law clients.  In keeping with the vast Divorce Finance Toolkit budget at my disposal I have agreed a package of chocolate digestives and tea for Sam’s blogging contribution.  If I judge his blog posts to be particularly helpful for my readers I will even let him dunk the biscuits.  Watch this space.

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Child support: arrears of maintenance

I have visited the topic of child support on many occasions. My virtual postbag this week has several examples of one common scenario: where the husband and wife start off by getting it very right, with an appropriate order for child maintenance upon divorce, but then, somehow, it goes very wrong.  The sad thing is, it goes wrong, very often, because of a basic misunderstanding. Most of this should be avoidable.

To the postbag…

Suzanne writes:

 

I have a court order (payable by standing order monthly) which has been running for 8 years. After the first year my ex husband refused to pay the yearly increase, and has been paying the same amount ever since. I have now requested that he increases the maintenance but he still refuses to do this.  Can you please advise what the yearly increase should be as I have no alternative but to take this back to court.
Also will he have to pay the arrears?

I have re-married two years ago, would this affect the payments?

Child maintenance

Suzanne later confirmed to me that this is a case of child maintenance.  In which case, Suzanne’s re-marriage is of no consequence whatsoever.  The child maintenance must be paid in accordance with the terms of the court’s order.  It is a great pity that the ex-husband has failed to observe the increases each year ordered by the court.  In the first place, the order for child maintenance would only have been in a court order if the husband agreed to the family court having jurisdiction for dealing with child maintenance (instead of the CSA).  Secondly, he would have agreed to the yearly increases (normally by reference to inflation measures like the Retail Prices Index) as he must have recognised that the cost of living – especially in relation to kids – only goes up and never down.  So his refusal to honour the increases he agreed is disappointing.  As I have commented before, the costs of bringing up children is usually underestimated.

Suzanne has asked me what the yearly increase should be.  Unfortunately, I cannot calculate that without knowing the amount of the original award, the date it was awarded and the mechanism used in the court order to determine the yearly increase.  But, I have laid out in previous posts how to calculate the yearly increase and also how to calculate the amount of arrears that have arisen when the yearly increase is ignored.  Click on “RPI” in the Tag Cloud on the left hand side of the web page: this will bring up all my previous posts on this issue. 

One issue here, if this is a child maintenance order, is that in the case of a disagreement over the amount of child maintenance, the family court responsibility comes to an end and the parents will have to look to the CSA.  The usual scenario is that one parent wants to receive more or one parent wants to pay less.  This would require a variation of the original order for child maintenance and this variation must also be by agreement.  But, in Suzanne’s case, she is not talking about changing the amount of the original order but rather simply requiring that her ex pays the yearly increases he promised. Suzanne, if she gets legal advice, may be told to apply back to the court to enforce the payment of the arrears.  But you have to get the court’s permission to recover more than the last 12 months of arrears.  The application is made on Form D11 (Family Procedure Rules, 2010, Part 18).  Suzanne would need to set out her calculation of how those arrears had arisen.  This is not that easy but look at my previous posts in the Tag Cloud for “RPI” and “Child Maintenance”.

The alternative for Suzanne if she wanted, would be to refer her ex-husband to the CSA so they could carry out a fresh assessment of the amount of child maintenance to be paid.  The CSA would not be able to recover the arrears for Suzanne under the court order but I suspect the ex-husband would end up paying more towards his child or children under a CSA assessment than under the court order which is now 8 years old and has not been increased each year.  The CSA may refuse to act though if Suzanne’s child or children are too close to the age of 17 (when CSA responsibility comes to an end).  I don’t have enough detail here to make any further comment.

So, if Suzanne took legal advice, it may well be that she should apply to the court to enforce the arrears.  Remember, that her ex could refer himself to the CSA and if they took responsibility for the situation then the family court order dealing with child maintenance comes to an end, and with it, any prospect of recovering any arrears.  So Suzanne may want to get her application into the court for enforcement first, and recover as much of the arrears as possible.  Since her ex will then have to disclose his present income in those proceedings, she can ask her legal advisers to calculate how much he would pay if the CSA were involved. She can then take advice upon whether to refer the child maintenance to the CSA from that point onwards if the award would be higher than she presently receives under the family court order.

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Divorce calculator: Journey Costs

Journey cost calculator for Divorce Finance Toolkit

I like calculators. They are really useful when you’ve run out of fingers to count on.

This is a journey cost calculator. In many divorce and separation cases the earned income has to stretch a long way. Here are a few scenarios where this calculator may prove useful:

    1. If you are divorcing and making a financial claim you will probably have to complete a financial disclosure questionnaire called a Form E. It asks for all sorts of information on people’s finances and one of the sections in particular is called income needs. Invariably, at first attempt, many people underestimate their true levels of expenditure. This calculator can help to focus on the true cost of the mileage that may be clocked up in getting to work.
    2. Or, you are negotiating with your ex over the amount of spousal maintenance or child maintenance that should be paid. One of you may require a car to get to work. That wage may be providing for maintenance payments. The cost of getting to and from work can be significant with the cost of fuel at the moment. This calculator may help to show just how much is being spent. This unavoidable cost could be factored into the discussions.
    3. Or a level of maintenance has been agreed and in place for a number of years but the paying or receiving party has a change of circumstances involving more motor travel, perhaps in relation to a work relocation. So the calculator could assist in showing why the change of circumstances means an adjustment in maintenance is required.
    4. Another scenario is where contact to children is being discussed. One of the parents may have to do a fair bit of mileage over time picking up or dropping off the kids for contact. It is a cost that could demonstrate why the parent paying maintenance will struggle unless this essential expenditure is taken into account. Or, for instance, if it is a mother working part-time and doing most of the motoring around to allow contact, why the maintenance she is receiving may need to have an element in it to cover this cost of travelling.

Ideally, I wish I could find a calculator that would allow road, tax, servicing and insurance to be incorporated but no luck so far.

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Childcare costs and minimum needs

Signposts for future childcare costs can be confusing

It is really important for spouses or partners, when separating or divorcing, to consider the needs of their children.  Most family solicitors will focus on the childcare costs and ensuring that these costs, which are significant, over the years of a child’s minority, are met.

One of the difficulties in brokering such agreements is the perception sometimes encountered from the payers of maintenance that they are paying far too much.  Surely a child can’t cost that much to house, clothe and feed? The data available to lawyers is not always helpful and tends to focus on higher income families who may be looking at private school fees.

It is therefore timely, in light of present and future austerity planning that The Child Poverty Action Group (CPAG) has just published research (with the help of the highly respected Joseph Rowntree Foundation) highlighting the costs of meeting a child’s minimum needs up to age 18.

Summary findings from the research

  • It costs £143,000 in total to bring up a child to age 18 and meet their minimum needs, which is around £150 a week (averaged for a child across all ages and including childcare costs and housing).
  • The basic cost of raising children has risen faster than inflation (CPI) in recent years, meaning that with wages falling behind and benefits being cut, Britain is moving backwards for the prosperity of our children. 
  • Childcare can add as much as £60k to the total cost of childhood. Childcare is one of the factors most responsible for the costs of children’s needs rising faster than inflation. The main state support for childcare costs is through tax credits and it was cut by 12.5% in April 2011. 
  • State support fails to ensure basic physical needs are met, leaving many families lacking sufficient funds for a healthy diet for the whole family and living in unhealthy housing conditions with problems like overcrowding and damp. The maximum support available only meets between 73% and 94% (depending on family composition) of basic costs for children.
  • A full-time job on National Minimum Wage is not enough to meet minimum costs for children. For single parent families, NMW leaves them with 89% of the basic requirement; and for couple families it is just 82% of the basic requirement (this is after benefits and tax credits have been included).
  • Child Benefit meets only 20% of childhood costs on average for couple families and just 18% for single parent families. Child Benefit has been frozen since 2010 and will have lost 10% of its value by 2014. Since the war, universal support with the cost of a child, first through family allowances and then child benefit, has been our national public commitment to all children. This universal arrangement will come to an end next year.
  • Having children leaves adults on benefits worse off. Additional state support for families with children is lower than a child’s minimum needs, so families face a growing shortfall with each child. Parents react by spending less money on themselves; in some cases parents will even skip meals so that their children don’t go without. If a single parent of three children used his/her adult benefit income to top up the child-related benefits so the minimum needs of the children are met, they would have just £12 a week to meet their own basic needs.
  • The cost of a child rises as they get older (excluding childcare costs). This is because of increased consumption needs – e.g. more food – and also because people believe children are less able to share a room with younger siblings once they reach adolescence. 
  • Costs are higher for single parents and, since cuts were implemented in 2010, the deterioration in income for single parents is worse than for couple families. A single parent has £107 less than they need and £166 less if they have three children.
  • Parents have modified their own expectations since the recession with fewer meals out and fewer presents for each other. Parents clearly prioritise children’s needs over their own. All acknowledge that life changes when you have children, you make more sacrifices, eat out less, life is less spontaneous and holidays abroad often come to an end. Parents also have less time available.
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