Maintenance, Meshers & Universal Credit

[FutureExH]

Unfortunately it looks like I'm headed for divorce for reasons I won't go into here. I'm hoping I can get some advice on the financials because I want to work out a settlement that is fair to both of us and provide stability for our DCs, 3 girls of primary school age (youngest is 5).

For background, I'm the only earner in the family (around £70-75k a year) and built my career before we married. DW has never had any career ambition and tended to take lower paid admin roles before the children came along and since 2011 has been a SAHM. Agreement was that she would retrain when youngest went to school and go back to work after a couple of years. I know I'm going to get less of the assets and pay child maintenance and happy to do so. (Just to say I think divorce seems fair in England, it's right and proper SAHMs are given time to adapt and I don't need advice from people who are going to whinge about it)! I do want to be fair to myself as well as my DW though.

Child maintenance looks straight forward. £700 a month. Looks like I can let my wife take child benefit and I can pay the higher tax charge too without affecting her benefits.

Problem though. I think a Mesher Order might be a good idea not for the next 13 years but until youngest DD goes to secondary school, when the eldest is 18, my DW can work full time and when we have enough equity to both buy something decent. But looks like the expectation these days is that the house transfers to DW and for the bank to approve it she has to prove she can pay the mortgage that is around £1.3k a month. Through benefits and maintenance she would only be left with about £500 a month for everything which is not enough.

Anyway, I thought a bit of spousal maintenance for the next 7 years would sort that out and happy to pay it because we'll both get a decent lump sum when the house sells and could agree 60/40 split in her favour. Apparently not though because every £1 in spousal I give her, £1 will be taken away in UC. I would have to give her around £850 spousal a month before she was even £1 better off and I can't afford that on top of my own rent and essentials. To get what she needed to pay the mortgage she would need 75% of my net income.

Do I have other options? Capitalising spousal won't help because house and pension are our only assets and having capital would stop her UC anyway. She can't work yet because she is retraining and no point dragging that out part time. Could I just pay her more child maintenance? Or would the bank accept a Mesher where I pay some of the mortgage directly not as spousal but for my own piece of the property?

[quote FutureExH]@Cleverpolly3

I'm being deliberately generous and assuming no nights with me, though the split is more likely to be 5-2 per week and a little more as holidays will be split evenly.

@Lougle

Having a house might not be a right, but I would prefer my children to be somewhere stable and I'm happy for my DW having somewhere to live when they're grown up as a byproduct of that.

@Outhere

SM into CM makes sense but there's going to be a trust element as CM is not that hard to have changed. Also, turns out a lot of banks will only consider up to £10k CM a year towards mortgage so I'm already exceeding that. I'm an honest bloke but divorce can make people think the worst of each other.[/quote]
Your calculation altogether depends on if she consults the CMS and you end up with a CAO

Not saying you will but just be mindful this may not end up being what you decide

I haven’t read the full thread, but I universal credit deduct 63p (or 67p I can’t reminder) for every extra £1 you earn. Spousal is considered like a salary. CM is not, so you could increase CM and she’ll keep her full UC. If you add SM she’ll lose.

I just want to say thank you for all the input so far. I'm trying to come up with a proposal that's fair and I'd really value your feedback on what I've come up with.

First the circumstances:

Not that many current assets. House, contents, vehicles minus mortgage and unsecured debt is around £90k. Sell the more expensive vehicle, buy a cheaper one, clear the unsecured debt and reduce the mortgage and assets will be £80k home equity and £10k in vehicles. Mesher Order but only for 3-4 years until DW has retrained and had 1-2 years employed.

Pensions by far outstrip current assets but they can't be accessed for at least 17 years, might not perform as well against inflation as expected and will be mostly taxable as a withdrawal or income. They're worth around £160k but I think a fair valuation is to reduce it to 80% of value to take into account the tax and by another 20% to take into account it can't be used now to buy a property so let's say worth £100k now.

Asset split would be 60:40 with DW getting £65k home equity, £5k vehicles and £73k of pension (but valued at £44k). I would get £15k home equity, £5k vehicles and £87k pension (but valued at £56k). The home equity split will however increase in value for both of us and I would want 25% equity on sale in light of DW tying up my capital and lending capacity for 3-4 years.

Income:

DW: Whilst retraining: Child maintenance of £10.8k for 3 DCs that will fall as each reaches 18; CB £2.5k; UC £10k approx. After retraining: UC drops to £5k, own income added of £13.5k net in year 1 and rising. Nominal maintenance of £1 to me in case I cannot work that ceases when children are 18.

DW would be just under £2k per month whilst retraining rising to around £2.6k per month afterwards.

Me: £2.8k net of CM per month. Nominal maintenance of £1 in case she cannot work that ends when children are all 18.

I'll initially have a higher income but commit to paying all school costs like lunches, uniforms etc and I also believe I have the right for income to catch up on losing the vast majority of current assets. Also long term I will have a higher income but that reflects my pre-marriage years getting degree and qualification in higher earning professional vs. her choosing not to have a career long before we met. I will also be offering 50/50 split of childcare and we're both still in our 30s so plenty of chance to build a career if she wants one (I'm even in a position to work less so she can work more to boost her earning potential, or I could cover childcare so she can work FT).

Does all this seem fair? Honest opinions please because I want to reach an amicable settlement.

If you're doing 50/50, can you stay in the house?

@HosannainExcelSheets

I think it's closer to 60/40 and potentially I'll have to bend to 65/35. It doesn't seem to make a lot of sense me keeping such a big house though and it would just feel wrong to have me rattling around whilst the children are jammed in like sardines in their principal residence. I'm not so much bothered about her, it's the children I want to do right by.

I don't understand where you say house equity would be 60/40(65/35) but you also talk about it increasing and wanting 25%? 25% of what?

Also you won't discount pensions just see it as an equity pot and a pension pot that require splitting. As you have a greater capacity to contribute and time on your side she may well have a claim to more of that also to make up her lesser capability to generate her own

@wobytide

Understood but time on our side works both ways. She also has plenty of time on her side to build her own career. I should clarify for the first two years I would be supporting her financially to retrain so it would not be unreasonable to expect her to make something of that increased earning power within the next three years. I think I'm right in saying that there is a distinction made between financially weaker parties who gave up a career and financially weaker parties who never even tried to have a career and therefore any negative consequences of a future decision to not work is her responsibility?

Also, I'm talking about an overall asset split of 60/40, not just home equity. The home equity I'm thinking of offering is 80/20 now; 75/25 if she wants a Mesher order until she has retrained and is in work or 60/40 if she insists on it being until youngest is 18. I'm going to be stuck in rental until any Mesher comes to an end and if it is to last 13 years then I won't have many earning years left to pay a mortgage. It would hardly be fair in 13 years time for her to be able to get 80%+ of the equity and own a mortgage free house whilst I am unable to raise sufficient equity and mortgage to buy anything at all. There are compensation factors that must be considered such as the fact that she would be lending my capital and my borrowing capacity for the next 13 years.

In terms of pensions, I appreciate you are pointing out that they tend to be treated separately but at the same time they are often used in negotiation to return to something closer to an equilibrium if the financially weaker party needs more of the current assets and they will be discounted. Pensions are not worth their face value because:

1. They are tied up for a long time and there are punitive tax rates for early withdrawal. It will be 17 years before I could access mine during which time the investments may go down as well as up.

2. Also when I do access it probably 27 years from now I will pay income tax on most of the income generated.

I've heard that they tend to be valued at 60-80% of statement value compared to home equity because they cannot be accessed immediately and are subject to tax.

In terms of my wife's claim on the pension, maybe 50/50 would be fair but I think it would be faintly ridiculous for her to walk away in her mid-30s with more than half of it. She has plenty of time to contribute to her own.

What has your solicitor said about your proposals?

I think you need a solicitor

@wobytide

I don't have one yet. I'm just trying to figure out what a fair and reasonable outcome would look like at the moment before seeking a free consultation. I'd really like to go down the collaborative route if we can but that will require fairness on both sides but from what I've read on this site and others things can get very messy.

I think the sticking point for me is going to be that I don't think I should be penalised for my wife being a SAHP for the last 10 years in the same way as someone whose spouse gave up a well paid career to be a SAHP. When my wife gave up work before the birth of our first child she was stuffing envelopes on minimum wage and for the 4 years preceding that she had a habit of taking jobs short term and then quitting, leaving me to cover the slack. It would be very easy for her to return to a job paying the same amount and in fact she has occasionally worked on a short term basis. In fact, as I am funding retraining, if anything she will come out of the marriage with a higher earning capacity. Any other difference in our incomes is because I worked hard in my 20s and built a career, most of it before we even met and - without meaning to be nasty - she didn't.

As a result, I think if she steps away from this marriage with 80% of the current assets, is supported by me whilst DCs are under 18 with more than the minimum CM and the outcome is closer to 60:40 after pensions are taken into account, I think that is a very fair outcome for her but I am concerned the law will say otherwise.

Are there cases where the higher earner (I'm on about £75k with bonuses) could lose all of the assets?

@millymollymoomoo

Yes, this will definitely not be a DIY job! Hopefully a collaborative approach will be possible.

As you've been in a relationship for over 10 years you are presumably close to it being a "long marriage".

You won't get to dictate necessarily what decisions were "hers" or "yours" because you've complicity both accepted those choices as what makes your relationship.

Having a consultation sooner rather than later will likely put you on a path to understanding what a solicitor and the courts will regard as fair(or what is unfair)

There is no easy plan as to what will happen and ultimately the kids trump everything else so with a lower paid wife having to provide an equal(or greater amount of care) then the pendulum may swing that way. No one can say

@wobytide

Surely an outcome of 100/0 would be absurd?

Probably depends on the circumstances but not sure anyone has said that's the case here.

The liquid assets aren't going to be enough to house you both so like I say, Speaking to a professional or two will get you a better understanding sooner rather than later. Your internal dialogue is trying to convince you that you are being fair but that isn't who has to be convinced that the end agreement is sound(rather than fair)

@wobytide

Sorry, I think I misunderstood you there. Yes, I think you're right in so far as the current assets are concerned. She'll get most of that, but I should get compensated to an extent for that by keeping more of my pension.

Hopefully we can agree I can keep about £15k of house equity though!

Anyway, I really should get this in front of a solicitor.

It would. It be a 100/0

More like 70:30 / 60:40 or similar overall but you need a solicitor re spousal and declining interim financial assistance and mesher triggers ( watertight) if you go down that route re housing

@millymollymoomoo

Thank you and apologies it took me a while to respond. When I first read "declining interim financial assistance" I thought you meant something about refusing to pay something and just realised what you meant! Sorry, I am very new to this!

I think the solution will be a very short term Mesher Order of 3 years after which my wife can take 95% of the equity to find a cheaper property (I've realised there are properties for about £100k less in catchment that would be suitable. Her share of the equity in three years time will hopefully be £90k so she would need a mortgage of around £160k which seems doable). I can be made good on the deal through the sale of the more expensive vehicle, the clearance of unsecured debt and a clean break on spousal maintenance.

Hopefully she will agree to it! Next step to talk things through with a solicitor.

My concerns would be that with a Mesher Order this is going to cause problems further down the line. What if the retraining that she is doing doesn't quite go as planned/career progression is not as quick/pay freezes etc happen. You could then be placing yourself in a position that will make things extremely acrimonious...plus you cannot move on.

For myself and my DP when going through the divorce process with our ex's, a clean break was necessary to prevent further conflict and our sanity.

@MorningNinja

I'm inclined to agree with you, my STBX less so. I would far rather have a clean break but with three DCs of primary school age, only £70k in home equity and few other assets I don't know any other way to resolve this.

Also, as the financially stronger party, her needs (generously interpreted as I understand it) will be prioritised over mine.

@FutureExH Realistically, when would she be able to afford to take the house on as her own if the retraining plan goes ahead?

I think what's important to remember here is that as time goes on, peoples needs/relationship situations/beliefs on what is realistic or right change dramatically.

I just think that when you do not have a clean break you cannot both move on in separate identities...and this is neither good or your STBEX. Imagine if you have a Mesher Order and it expires; the DC and your ex are still at the home but she cannot afford to buy you out. This would be an awful place for you to be in because the kids will have further uncertainty and trauma and you will be the bad guy. Plus, it would be a pretty awful position for you to have to be in.

For me, it was important that I had something that was MY OWN. I speak that as a female with an EX that had a considerably higher salary than myself.

For my now DP, the judge stressed the importance of a clean break and thats what he had/wanted. It has also allowed our relationship to move forward together as we now don't have to worry about our 'assets' a few years down the line when his EXDW takes him back to court because her 'retraining' has stalled/not worked out, etc.

It's all about reducing conflict because from my experience conflict is what really screws the DC up, not the home that they are living in.

@MorningNinja

I think you give sound advice and it has occurred to me that perhaps the reason my wife would consider a Mesher order now is because she has not begun to think these things through fully. I do wonder if she got a Mesher but had to pay the mortgage on her own, she could end up only affording interest only and having very little capital at the end whereas she could afford to pay capital and interest on something cheaper with no looming move date in the future.

If you don't mind me asking, what was the relative salary difference between your DP and his ex-wife to reach that outcome? I feel like I have a salary where most men would get a clean break (£70k) but my wife would realistically only command a salary of £19k even if she worked full time.

On the one hand it seems doable by giving her more of the assets but the nagging doubt at the back of my mind is that she'll have cash flow problems. She'll have more assets but they won't be easily accessible in an emergency, especially if she is already mortgaged to the max.

Most mesher are awarded on the basis that the party living there can take on the whole mortgage. Unless I’m very high earning cases - which you are not
You may find that a mesher is not possible either hence why you really do need proper expert legal advise on your options
I completely agree with pp though
Also need to factor in rising house prices, she could be in a situation where the trigger happens, house prices have risen and she now owes you an even more unaffordable value plus then also can’t get a mortgage on a new property to house her needs

What if her earnings don’t grow in line with current expectations

@millymollymoomoo

Yes, I think you are right. Ultimately, it's going to be better to her to adapt now rather than later and have independence.

Thank-you, this has been really helpful. I came here thinking a Mesher Order was problematic but trying to make it work as a compromise. I was expecting to get "the other side" perspective but in the end found everyone here agreeing with my own doubts!

We have simply kept our mortgage in joint names and haven't filed financials with the court yet. We worked out a fair split and don't think it's any of the state's business.

Dp is the same, sacked his lawyer. Keeping amicable and being fair to each other isn't always easy but saves a lot of money in legal fees!

@motogogo

I would like to do something like that but I do want the certainty of a consent order around everything. My concern in my situation is that there is a big earning differential due to the lives we led before we met and I don't want to keep myself tied financially to someone without certainty about how it ends.

For example, I don't want to discover in another 10 years time that when we first separated I carried on saving a pension and she didn't so she gets a second bite of mine. Or that because her capital needs are greater than mine and we're now too old for mortgages, a Martin Order is necessary and heyho I can rent until I die. My wife also had a tendency to quit jobs without having something else lined up and I don't want to pick up the slack for that when we're no longer a couple.

My objective is to get us on an equal footing now that will require her having more of the assets today but with no future claims on my capital, pension or income so that I can have certainty over my future. Don't get me wrong, I'm not greedy. I would be happy in a 2 bed flat with a 10 year old car and a modest income, I just want to know it's mine and cannot be taken away.