It is not uncommon in longer marriages, cases where there are children or just very wealthy people, that one party can expect to receive maintenance for a number of years and sometimes indefinitely. Maintenance often bridges the gap where there is a disparity of income or simply where one party is not able to make up the difference between what they need to live on and earnings that they can attain through their own work. Maintenance is often paid for a defined period of time and typically can finish or be reduced when the children transfer to secondary education.
But receiving maintenance can be unreliable. It can be fraught with difficulties such as a separating husband who remains bitter and untrustworthy and so misses payments or ceases altogether. Enforcement of maintenance orders can be difficult and costly. There may be good reason why one party stops paying maintenance such as loss of a job or becomes too ill and cannot work at the same level as before.
In some situations, therefore it may be preferable for the potential receiver of maintenance to consider capitalising the maintenance and receiving a lump sum or perhaps additional properties as an alternative to maintenance.
How do family lawyers or the courts assess what a capitalised maintenance figure might be? Many years ago there was a reported family finance case called Duxbury in which the court heard evidence from expert mathematicians on the basis of how you can capitalise maintenance. The calculation is complex and took into account the age of the wife, life expectancy, inflation and the advantages of having the money upfront which can be invested and produce both an income and growth. The lump sum that he has paid can be drawn in regular monthly instalments to meet the needs of the wife.
However, the method of calculating such lump sums using the Duxbury method has come in for some criticism as not being fair to the wife. A more progressive method of calculating can be found using a more detailed calculation by Bailey and Lung. This can be found via email@example.com. The calculation here is much more detailed and takes into account more relevant factors. The calculation makes a fair attempt to apportion the risk between the two parties and does not push the receiving party into making such higher risk investments. The pair have advised on a number of divorces but as yet the method has yet to be put through its paces in a contested hearing before a judge. Suspect only a matter of time. It is certainly a factor we consider when advising in a divorce.