This year has seen an enormous rise in the cost of living. Soaring energy bills, rising interest rates and the increased cost of food and fuel are undoubtedly having a noticeable financial impact on people across the country. As the cost of living crisis continues to affect people’s day to day lives, what impact is it likely to have on a couple that wish to separate?
Living together
Recent research suggests that a third of couples stay living together for an average of more than a year after they have separated. Almost half of them continued to live in the same household because they could not afford to move out.
It can be difficult at the best of times to manage and afford two households out of the same pot of money and the increasing cost of living may well raise many questions and concerns as to how you can afford to live separately.
Separation Agreements that set out the basis of your interim living arrangements whilst separated could provide a framework for all to work with. A Separation Agreement can deal with how the short term financial position is to be managed whilst living together as well as setting out the long term agreement of separating the matrimonial finances.
Assessing income
When considering the financial split on separation or divorce, the Court will expect the parties to consider their respective income needs and those of the children. Your income needs are your general monthly expenditure and it involves detailing a list of your reasonable regular outgoings such as rent, mortgage, utility bills, food and clothing etc. This is an important part of the process as it allows you each to see what your respective outgoings are and how much you need to meet them. It can then be compared to how much income you have.
Where possible, we recommend that both parties try to take a fair and pragmatic view of their income needs and try to pre-emptively factor in provision for the cost of living crunch. It is advisable to create a realistic budget for all of the costs to be covered including future expected income needs.
It is worth considering whether there are any government benefits available for you to claim to supplement your income. For example, Child Benefit, Universal Credit or a single person Council Tax discount. Some benefits are means tested and only available if you are living separately or have children under a certain age so you should check the Government website for details. It is important to try to maximise your income as far as possible to meet your income needs.
If you have children, then child maintenance is payable by one parent to the other to help with the children’s expenses. The Child Maintenance Service (CMS) have a calculator to work out how much maintenance should be paid based on a percentage of gross weekly income, less any pension contributions. Deductions are made according to the number of nights the paying parent cares for the children. It is sensible to try to agree the level of child maintenance payable but in the event an agreement cannot be reached then the Child Maintenance Service can assist.
Spousal maintenance can also be considered. This is separate to child maintenance and is a monthly payment by one spouse to the other to assist in meeting income needs. Whether spousal maintenance is payable requires a careful exercise of assessing each party’s reasonable outgoings against their maximum income from all sources. In effect, there is a balancing act between the parties’ needs and obligations and their respective abilities to meet those needs.
Varying existing maintenance orders
Child maintenance or spousal maintenance is always variable. If the Child Maintenance Service are involved in managing the child maintenance payments then they will annually review the paying parent’s income to ensure that the correct amount is paid. If the parties have themselves agreed the level of child maintenance to be paid then they can, at any time, agree to vary the child maintenance up or down.
Spousal maintenance orders are also variable and can be changed or stopped altogether in the future if there is a change of circumstances such as change in income, illness or retirement. Such orders can be varied up or down by agreement or by further Court order.
The effect of the cost of living crisis is likely to tighten the squeeze for both the lower earning spouse and the higher earner. The former will want to make sure any maintenance sufficiently covers their outgoings, and the latter is also likely to have higher bills and outgoings for mortgage/rent etc with potentially less surplus income available to pay the other spouse. Furthermore, increasing inflation rates could cause problems for the paying party if any order provides for inflationary increases year on year.
Spousal maintenance must be considered carefully as any change very much depends on the financial and personal circumstances of the parties involved.
In spite of all of the present uncertainties it is important to take legal advice, ideally as soon as possible, and try to take some control early on. There is no doubt that discussing matters and trying to reach an agreement will help reduce conflict and complications later on.
Please contact Laura by email laura.martin@blanchardsbailey.co.uk or please call us on 01258 459361
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