Will the rising cost of living impact on my divorce settlement?
With average wage growth failing to keep pace with inflation, the increasing prices of fuel, energy, and food may put pressure on many household budgets.
For couples going through a divorce, consideration of the finances is crucial. Immediate issues such as where you will live and who will pay the mortgage, rent or bills while the overall settlement is being negotiated will need to be resolved, as well as anticipating what you will need to meet your regular outgoings going forward.
It may be necessary for you to continue to live under the same roof for financial reasons, or if one of you moves out then you will both need to ensure you can afford to pay the outgoings on your two households. Without consideration of these costs, mortgage or rent arrears may accrue, and could lead to your home being repossessed. Any default in payment could also affect your credit rating, which may cause problems if you wish to obtain a loan, mortgage, or even some employment opportunities in the future.
What if I cannot afford to meet my outgoings?
In view of the rising cost of living, it may be that you encounter difficulties in paying your household outgoings without financial support from your spouse’s income. The best way to address how these costs are to be managed is to communicate with each other and try to reach an agreement.
Child Maintenance
If you have children together you may be able to claim maintenance on your child’s behalf. The amount of child maintenance payable can be worked out using the Child Maintenance Service calculator, which considers a number of factors including the paying parent’s income, the number of children living with the paying parent, how many children are involved, and how often the children spend overnight with the paying parent. You can arrange child maintenance payments and agree the amount between you directly. If this is not possible the Child Maintenance Service can assist you.
Spousal Maintenance
You may also be entitled to claim maintenance for yourself. Unlike child maintenance, there is no specific formula that applies to spousal maintenance which is calculated by balancing the income and earnings of each party against their needs. This will also depend on whether your spouse can afford to pay you maintenance. On this basis, your income needs will be considered by compiling a list of expenditure on a monthly or annual basis alongside your available income. Your expenditure should be realistic and proportionate to the standard of living enjoyed during the marriage.
Benefits
There are benefits which may be available to one of you if you are living separately, including single person Council Tax discount (so long as there is no-one else above the age of 18 years in the house) which means you pay 25% less.
You may be entitled to claim child benefit and/or Universal Credit. To find out if you are eligible, you can check the gov.uk website for details.
Can I protect maintenance payments from inflation following our divorce?
The Child Maintenance Service will carry out an annual review which will assess the paying parent’s income, benefits, and circumstances to ensure that the right amount of child maintenance is paid for the next 12 months.
In respect of spousal maintenance, the length of time and condition of payment will depend on the circumstances of each case. Maintenance for a specified sum to be paid each month will weaken in value over time as a result of inflation. To maintain its value, payments should be linked to inflation, which may include an automatic annual uplift or variation. This will only occur if provision is made in any court order, and we will be able to advise you appropriately when negotiating a financial settlement upon divorce.
How can we help?
If you require any assistance in relation to a relationship breakdown and are concerned about the possible impact this may have on your financial settlement, contact us today for more information.
