Maintenance and Asset Division: How will my separation affect my standard of living?

Sarah Speed and Alexandra Hawkes of our Family team share insights on the realities of maintaining your lifestyle during and after your divorce.

Divorce can raise difficult questions about what the future holds, especially when it comes to finances. For anyone going through a divorce, the thought of their standard of living declining post separation will be of concern. This is particularly pressing when finances are already squeezed or one of the parties has perhaps seen a change of fortunes such as a redundancy.

The Purpose of Spousal Maintenance

In cases where one spouse cannot meet their financial ‘needs’ independently, spousal maintenance may be awarded. There is no formula for how much maintenance is enough, it will instead be fact-specific, dependant on what one party needs to fill the gap and what the other party can afford to pay. 

The court aims to strike a balance, ensuring that the financially dependent spouse has the resources to transition into their post-divorce life, taking account of their own earning capacity and capitalising maintenance payments where possible, to ensure an early clean break can be achieved.

Rate of spousal maintenance

When determining how to redistribute the available resources on divorce, the law requires consideration of the parties’ needs and standard of living during the marriage.

In higher net worth cases where there is more than enough income to go round, or where families have enjoyed a high standard of living, it may be argued that needs should be “generously interpreted” [Baroness Hale’s well-known dicta in Miller v Miller / McFarlane v McFarlane [2006]]. Regardless as to whether needs are generously interpreted, every analysis of a party’s needs begins with their budget or expenditure schedule. This document is often central to a case and requires the parties to set out a list of current and future expenditure on a monthly or annual basis. 

In BD v FD [2016], Moylan J made it clear that, just because the husband could afford a better standard of living, a bigger, more generous, award for the wife was not justified. 

Rate of child maintenance

Where there are children of the family, it is common for child maintenance to be payable by the non-resident parent in addition to spousal maintenance. Child maintenance, unlike spousal maintenance, is formulaic; based on a Child Maintenance Service calculation undertaken either by the parents or the CMS itself using a percentage-sharing approach. As such, it is not based on standard of living. However, this approach is only applied up to a certain point. 

Where the paying parent earns over £156,000 gross per annum, the receiving parent may seek a “top-up”, over and above the CMS maximum assessment (threshold). This is known as a Household Expenditure Child Support Award. No formula applies at this level and any additional sums payable will be case-dependent, once again based on needs, taking into account standard of living.

Asset Division and Lifestyle Adjustments

The starting point for the division of matrimonial capital resources is equal sharing. When it comes to housing, if there is less than enough to go around, it is perhaps inevitable that the parties will both have to downsize and reduce their previous standard of living. Borrowing capacity will be a key factor here, with the higher earner often being required to accept less than half the available capital and borrow more by way of mortgage to meet their housing need. Practical adjustments will often be necessary, particularly where the available capital resources are illiquid, such as those invested in businesses. In those cases, creative solutions may be needed to balance lifestyle considerations whilst also preserving income producing business assets.

How We Can Help

At Herrington Carmichael, we understand that you will be keen to minimise the adjustments needed to maintain your pre-separation lifestyle post-divorce. We work with other professionals such as Independent Financial Advisors and mortgage and pension experts and offer a rounded approach that takes account of lifestyle and needs, bearing in mind your unique set of circumstances.

Contact us today to discuss your options and take the first step towards securing your financial future.

Sarah Speed
Partner, Family
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Alexandra Hawkes
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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