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Capitalising Maintenance to Protect Divorcee Retirement Income

15 July 2010


Women who have received a lifetime maintenance order following their divorce should consider capitalising their maintenance in advance of the former husband’s retirement or they may face a big drop in income warns Adams & Remers solicitors.

Katherine Gage, Solicitor at Adams & Remers comments: “Many women whose former husbands are approaching retirement may not have considered that a change in his retirement income may affect their income, potentially leaving them substantially worse off.”

Lifetime maintenance orders used to be made more frequently where a wife had given up work to raise a family and was unable to support herself and where there were insufficient funds within the marriage pot to provide a lump sum payment to capitalise maintenance. Many women in this position may not have gone back into work and if they haven’t remarried they still rely solely on their former spouse for support. “Many women have simply not given thought to how their former spouse’s retirement will affect them, but they can take steps to discover if it is now feasible to capitalise on their maintenance and secure a lump sum payment” comments Katherine Gage.

Katherine continues: “When circumstances change or are to change, either party can go back to the court where the order was made if they want to challenge the financial arrangements that have been made. The benefit of capitalising maintenance is that you secure a lump sum to invest yourself. Many women may also not realise that their income will end if and when their spouse dies. If he has not left provision for her in his will, she may be faced with making a claim for provision out of the estate.”

The recent case of Philipa Vaughan in April highlights this issue when she successfully won a lump sum of £215,000 after her husband sought to stop her £27,175 annual maintenance when he retired despite them being divorced for 25 years. She successfully argued that she had been caused undue hardship after losing her ‘modest but vital income for life’.”

Katherine concludes: “Cases such as this highlight that a lifetime maintenance order is based on the lifetime of the spouse paying the maintenance and not on the lifetime of the spouse receiving it which may be substantially longer. Many divorced women may have not worked long enough to receive a modest state pension so they will face hardship issues unless this is addressed.”

 

For further information regarding this issue contact Katherine Gage at Adams & Remers.

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+44 (0)1273 403253


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