Capitalisation Of Spousal Maintenance

In divorce and civil partnership dissolutions, one of the powers open to the Court is (where circumstances allow) to capitalise spousal maintenance. Capitalisation of a spousal maintenance order means rolling future spousal maintenance payments into a one-off payment.

In what circumstances is capitalising spousal maintenance possible/beneficial?

The Court has a duty when dealing with financial matters in divorce or civil partnership dissolutions to consider if a ‘clean break’ can be achieved. A clean break brings claims against one another to an end. Capitalisation of maintenance is one of the ways in which a Court can help to achieve a clean break.

Capitalising spousal maintenance is only possible where one party has sufficient capital to make the payment. From the paying party’s perspective, they make the payment in the knowledge that there can be no further claims for spousal maintenance against them in the future. They must weigh up in the balance whether or not their spouse may remarry at a point before their anticipated maintenance liability would have come to an end (remarriage automatically ends spousal maintenance). Alongside that, the paying party should also think about whether or not they are confident that they are going to remain working and what the remaining part of their working life may look like. There is little point in capitalising spousal maintenance if, for example, you are working in a volatile industry.

The receiving party has to be satisfied that they will be able to manage financially on the lump sum they receive. There may be the benefit of not having that monthly anxiety as to whether or not the maintenance will be paid or if there may be a future application to vary maintenance

Maintenance is calculated by reference to not only the receiving party’s needs but also, significantly, the paying party’s ability to pay.

The Court’s approach to capitalising spousal maintenance

Before the lump sum figure is decided the Court has to undertake an assessment of what future maintenance payments might be. Once that assessment has been made, and subject to it being affordable, consideration can then be given to how to calculate what the payment should be.

The standard approach to capitalising spousal maintenance is to use a Duxbury calculation. The calculation is made by using the Duxbury Tables which are based on various assumptions, such as inflation and life expectancy. The Duxbury approach is not without its challenges and the table should be seen as a tool rather than a rule. The Court is not bound to follow the Duxbury calculation.

Duxbury, however, seems to remain the favoured approach by many Judges. Lawyers on the other hand are exploring alternative methods, such as input from an independent financial advisor who many see would be better placed to provide more realistic and accurate calculations based on projections, market drivers etc.

Whether looking at this as payer or payee, capitalisation has its benefits. For one, it will provide a complete disentanglement both financially and emotionally from your former spouse.

Financial matters involving spousal maintenance are rarely straightforward and you should seek legal advice at the earliest stage and take time to consider all of the possible outcomes.