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Capitalising Spousal Maintenance and the Duxbury Calculation

Dariya Skerratt, Trainee Solicitor in our Private Client team, discusses the ins and outs of paying spousal maintenance and the Duxbury calculation.

In divorce or dissolution proceedings, the court can order one party to make regular payments to the other, by way of maintenance (spousal maintenance). Frequently, one party or the other may prefer the payments to be capitalised. This means that any maintenance payments would be paid to the receiving party via one lump sum payment rather than monthly payments over an extended period of time (often many years).

 

When Can Spousal Maintenance be Capitalised?

Spousal maintenance can be capitalised when the paying party has enough capital to make a one-off lump sum payment to the receiving party. Once this capital payment is made, the receiving party cannot make future claims for spousal maintenance. It brings all spousal maintenance claims to an end.

 

What Factors Must be Considered? - Benefits and Risks

The paying party should consider:

 

  1. Income Prospects

If there is uncertainty over future employment prospects, capitalising spousal maintenance may not be the best option. It could leave the paying party in a financially vulnerable position or paying more than they would have done if the payments had continued on a month-by-month basis.

 

  1. The Possibility of the Receiving Party Remarrying

If the receiving party is likely to remarry before their maintenance payments cease, this needs to be factored into the decision, as remarriage ends all spousal maintenance. However, it is a possibility that the receiving party would delay entering another marriage, until they had stopped receiving payments from the former spouse.

Agreeing to pay a capitalised sum is a calculated risk for the paying party and involves an element of looking into the future. Your solicitor would be able to explain the risks to you,  based on your situation. The paying party will not want to pay more spousal maintenance via a capitalisation than otherwise would be paid via monthly payments, should the receiving party remarry during the term of the maintenance provision.

 

The party receiving the capitalised maintenance should consider:

 

  1. Certainty & Finality

Monthly spousal maintenance payments have the disadvantage of keeping the party tied to and relying on the paying party to maintain them going forward and does not allow for an immediate clean break and financial independence. There is also the disadvantage that if monthly payments are made and the paying party loses their job or takes a job that pays significantly less than before, an application to vary the maintenance payments downwards can be made. This could result in the court ordering that less spousal maintenance is paid than before. The receiving party therefore needs to consider whether a lump sum payment is more certain and final than monthly spousal maintenance payments.

 

  1. Financial Independence

The receiving party needs to ensure that they will be content with the lump sum payment and that they will be able to financially maintain themselves with that sum for the remainder of their life. It is often advised that the receiving party obtains independent financial advice as to how to get the best out of the funds.

 

How is a Capital Spousal Maintenance Payment Calculated and What is the Duxbury Calculation?

The court must first assess and identify what monthly maintenance payments would be. It then calculates the capitalised lump sum payment based on this.

The court uses the Duxbury Table to help identify what lump sum would be needed to capitalise the maintenance payments. This table cross-references a party’s reasonable outgoings with their life expectancy, based on age and gender. It also considers tax rates and inflation rates, which are adjusted annually. Effectively, the capitalised sum is then used up by the date of life expectancy.

The Duxbury approach is used as a starting point and a guideline, rather than a strict rule, particularly in light of ever-changing factors and the specific details of each case. The Duxbury Table may be seen as outdated, inaccurate, and in need of reform. However, it is a preferred approach used by many courts as a starting point.

 

If you are considering capitalising a maintenance payment, it is important to take legal advice at the earliest opportunity.

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