Times are changing for those receiving monthly maintenance

2009 - the head of Manchester based JMW Solicitors Family Law department discusses variation of maintenance payments after a divorce settlement agreement.

The current financial crisis can lead to situations not immediately anticipated and can come as a shock to those who have budgeted for the future and suddenly have their former Husband or Wife seeking to change financial arrangements that have been in place for some time.

It is not every divorce settlement that results in a clean break i.e. where there is no ongoing financial payment between Husband and Wife. In most cases there is child maintenance to be paid, but in some cases Wives are entitled to receive additional monthly payments in their own right following divorce, whether for a short term or for so long as they and their former Husband are still alive.

However what might seem like "a nice little income" (otherwise known as spousal maintenance), has become problematic in recent months with the impact of the credit crunch and the retail prices index being in negative territory for the first time in 50 years.

The main problem with this type of maintenance, like child maintenance, is that it can be varied if the Husband or the Wife's income or financial situations change. Neither one is in control of the other's life so it can feel a little like having the rug pulled from under you at short notice. With the recession taking hold and many suffering redundancy, loss of bonus, wage reduction or fall in company profits, many Wives are faced with the request for the monthly sum they receive to be drastically cut at short notice. In fewer cases, if it is the former Wife's income that has changed, this may lead to a request of the Husband for an increase in maintenance which can equally affect his budget!

It is hoped that both the Husband and the Wife can come to some agreement as to what to do when one or other's financial circumstances have changed. However for those that cannot agree, the court has to decide what reduction (or increase in some cases) is appropriate. The court has a very wide discretion to decide what order to make looking at all the circumstances of the Husband and the Wife. If there are children to be considered this will be a main consideration for the court.

With applications for variation of a maintenance order come risks for the Husband as well as for the Wife so it is not a position that should be adopted lightly. The court is entitled to consider making a one off capital payment to Wife to "buy out" her maintenance which can result in a substantial payment. In some situations the court can attack a pension which was left previously "unshared" in the divorce settlement. In other cases a court might terminate an order resulting in no further payment at all. There is also the issue of costs to be considered; there is little point saving £250 per month if the cost of doing so is £5,000! Variations are not for the faint hearted.

So what should you do if faced with such a request for you to accept a reduction (or an increase for that matter) in monthly maintenance payments? The first step is to ask for full details of the other's financial position. This will include details of capital, pension and income as well as outgoings. This exercise is usually done using a standard form (known as a form E). The use of a standard form ensures that both the Husband and the Wife disclose the same amount of information and that nothing is missing.

The second step is to take legal advice (in some cases it might be wise to have advice at the time of completing the form E). Solicitors experienced in family law should be able to provide an idea as to what if any variation a court is likely to reach. This information can then hopefully lead the Husband and the Wife to reach sensible agreement without the cost and upset of court proceedings.

For some the divorce settlement may refer to an annual increase in monthly maintenance payments linked to the retail prices index. This is the most familiar, general purpose, domestic measure of inflation in the UK. The Government uses it for uprating of pensions, benefits and for wage bargaining. With recession this method has become fraught with problems.

Some Wives have traditionally preferred the retail prices index approach to annual increase in their maintenance amount rather than having to have any personal discussion about an increase with their former Husband. In the past this has always resulted in an increase, albeit a small amount, to the monthly payment received but at least proportionate to the amount of the payment being made. This year, for the first time in 50 years, the retail prices index has dropped below zero. The question is therefore will we now see some automatic reductions in spousal maintenance payments on the anniversary dates? This will no doubt work its way through the system shortly. The court still retains the ability to vary the maintenance payment in these cases so if faced with this situation it is worth considering taking legal advice before accepting a reduction.