Many experts fear the cost of living crisis is making it harder to reach a divorce settlement. 

Uncertainty around earnings, mortgage rates, energy prices, interest rates not to mention how much inflation will increase the price of even our most standard day to day purchases has left couples scared that any financial settlement they reach today won’t meet their needs in the near future. 

The impact is of course being felt more acutely by the lower earning spouse, especially if they are to be left with responsibility for their home and children.  They are having to look very seriously at whether the maintenance payments they are being awarded will adequately cover their bills a few months from now.

However, there are also issues for the higher earning spouse.  As they could end up having to cover multiple mortgages, the likelihood that interest rates will rise steeply in the future is understandably causing them concern.

Which financial elements should you factor into your discussions?

As the cost of living is going up across the board, the crisis could potentially impact every element of a financial remedy but the areas that require immediate consideration are:

1. Child Maintenance

If you have children together you may be able to work out child maintenance payments using the Child Maintenance Service calculator.  This will take into account their paying parent’s income, how many children are involved and the number of children living with the paying parent (or how much time they spend with the paying parent if they don’t live with them).

If an agreement can’t be reached, the Child Maintenance Service may be able to help.

2. Spousal Maintenance

The rate of spousal maintenance is calculated by evaluating each party’s income against each party’s needs (including rent, bills and standard of living).

This calculation is complicated further by the fact it also depends on the paying spouse’s ability to pay which could again be impacted by the cost of living crisis.

3. Benefits

Depending on your circumstances you may be able to claim certain supplementary benefits, for example Universal Credit.  Some councils will offer additional benefits as long as you are not living with anyone else over the age of 18.

It is also important to note that these elements can only be settled if a couple if physically separated.

More and more the cost of living crisis is forcing couples who want to separate to continue living together for financial reasons, fearful that if one party moves out, it would become impossible to cover two sets of outgoings. 

While this obviously delays the need for legal intervention, it can cause very serious issues for both spouses and their children if being forced to remain together means the home has become a hostile or even harmful environment.

What should you do if the terms of your settlement are no longer suitable because of the cost of living crisis?

After a divorce it is possible to ask the court to change existing terms of a financial settlement if they are no longer suitable because of significant changes to the spouse’s financial circumstances or because of one party’s inability to continue to pay the other.  However, it is very rare for the court to agree to this type of application.

There have been cases where illness, retirement or redundancy have been considered but at present it is felt that the rise in the cost of living will not be accepted as a reason to make an application.

If you were considering making such an application, both parties would need to put together a budget that clearly shows the increase in living costs the parties need to cover (including the additional likely short term increases), something that will be influenced if the management of two households is involved.

While this will make it easier for the judge to see the complete picture, it is not infallible.  No one knows exactly how costs will rise or which costs will rise fastest.  This makes accurate forecasting impossible.

As with all Family Law cases, the outcome will be dictated by the circumstances.  This is why we would always recommend that before you make any decisions, you should take advice from an experienced family lawyer.  If you would like to talk to one of our experienced barristers in the first instance, please contact us today.