Financial Settlement - Reasonable?

[Bub1765]

I went into my divorce thinking I was being quite reasonable with my offer for settlement but 6 months on I seem to be getting nowhere. I've had legal advice and got the impression that I'm being reasonable, in line with a court outcome but not excessively generous but my STBXW seems to be expecting a lot more and ongoing financial ties for a long time. I would be most grateful if those who have settled or been subject to a final hearing think this is within the right ball park:

H: 41, earning £102k gross per annum. Net income per month of £3,635 after commuting costs, child maintenance and taking sole responsibility for shared debts.

W: 39, earning £14k part time. Net income per month of £3,183 when benefits and child maintenance added to total. Universal credit element is £671 of this. Was retraining to earn more and recently graduated, has now chosen not to pursue this during divorce.

Children: 3 (ages 12, 9 and 7)

Assets: House £110k equity (£385k minus mortgage and cost of sales); Pensions £190k, Cars around £10k.

Liabilities ex mortgage: Debt of around £8k.

Proposal:

Children: 4 nights with me per fortnight, 10 nights with her. 50/50 split in school holidays. This part has been agreed and is not contentious although I am more than willing to do more to enable her career (but this balance would pay her a decent amount of child maintenance).

Assets: 90% equity to her, 10% to me. I will agree to stay on mortgage for 4 years when youngest is at secondary school, at which point she must either remove me from the mortgage and pay my 10% or sell. Pensions 70/30 split in my favour. Each keep own cars.

Income: Clean break on income. Child maintenance paid.

For context, my STBXW is earning beneath her earning capacity and is unwilling to do anything about it. Childcare would largely be covered by additional UC and I would happily pay the rest but I am much less willing to pay this amount without a clear goal of improving her earning capacity and ceasing to be dependent. I would estimate - conservatively - that her immediate earning capacity is £25k and this could rise to £40k. It could go rather higher with a bit of effort but I won't crystal ball gaze.

Points of contention are that:

1. She wants to stay in the house for 14 years when youngest is 21, me remain named on and contribute to the mortgage albeit not 100% and then to sell and split in her favour. I think this is a bad idea because she won't do anything to improve her earnings now and both of us will probably find ourselves with insufficient capital to buy again in our mid-fifties (unless she got the lion's share of the equity at that point, in which case only I would end up unable to buy but obviously I don't think that would be at all fair).

2. She wants spousal maintenance but because she has universal credit of £671 I would have to pay a lot to make any difference to her income, to the point that I would have a materially lower income than she does. I don't think this is fair on our children either as it would leave me barely able to cover my own costs and much less able to provide for them on an ad hoc basis. My counter position is that I could agree to cover certain expenses (e.g. hobbies, uniforms, school trips) outside of the CMS arrangement.

Would welcome thoughts?

She is very unlikely to get what she wants if it goes to court.

In your position I would pay for her to see a solicitor to give her advice on what she can expect in court.

Many people have unreasonable expectations.

Your proposal sounds OK.

A couple of questions

1. Will she be able to get a mortgage with 90% of the equity or will she then have to use that equity lump sum to pay for rent?
2. How much spousal support and for how long is she asking?

A good place to start is for her to go and see a couple of building societies and see how much she can borrow. Based on that, you have a bit more clarity on how to move forward.

She spoke to a solicitor for an hour. The trouble is I'm not entirely sure how well she conveys the relevant facts to the solicitor. For example, she might say "I earn £14k per annum" but forget to mention that she is capable of working more hours and has recently completed a degree with a view to improving her income that was abandoned when I filed for divorce.

I almost need her to retain a solicitor who writes to me so that I can write back and better inform her solicitor!

I think you’re being too generous personally but it’s fair if you are ok with it

sges being unrealistic and is v unlikely to achieve her wants if it goes to court

Good questions.

1. If she maximised her earning capacity now then she could lend enough to buy a smaller but adequate property. If she doesn't maximise her income, she could still buy but in an undesirable part of town.

My position is either:

• that 4 years is long enough to sort her earning capacity out and release me from the mortgage. If she leaves it too late, the child maintenance will stop being counted for affordability and her position will get worse; OR
• if she does not do so, it is not unreasonable for her to move to a less desirable part of town or rent, especially if that is what I'm expected to do.

2. She wants an income of £200 more than she has but I would have to pay her £871 to achieve that because of universal credit rules and it would result in her income being £3,283 and mine £2,770. I find this grossly unfair especially if she stays in the FMH and I have to rent; suitable accommodation to have the children will cost me around £1.5k to rent and I won't be able to save any money to move on and would remain significantly poorer than her as a result. My view is that an uneven split of capital should settle this up front.

I don't think I'm being generous. I think it's roughly aligned with the outcomes of the rare needs cases that get reported but not to the point that she will be doing cartwheels around the living room or anything!

To clarify: the marital "pot" is £300k (£110k equity, £190k pension), minus £8k debt.

You want 10% of the equity (£11k)
Plus, 70% pension (£133k)
A total of £144k

You want your ex to have 90% equity (£99k)
Plus, 30% pension (£57k)
A total of £156k

You each keep your own cars and (for the sake of fairness) let's say you split the £8k of debt in half between you (I know this can't be taken from the pension or the equity, but just for ease)

You have £140k left
She has £152k left

From a total of £292k, she'd get 52% and you'd get 48%.

However, your earnings are 7 times greater than hers and she will be doing the vast majority of the parenting, feeding, clothing, school runs, sick days etc of the kids.

I wouldn't be happy with that percentage split.

@S00tyandSweep Yes but you're counting pensions and equity as the same but it's like comparing apples and oranges. I cannot access the pension for at least another 16 years. Typically the way a court would deal with assets is to do a current asset split (normally no more than 70/30 in one person's favour) and then split the pensions 50/50. However, you can offset if one party needs more of the equity. A reasonable split of equity would be around 60/40 in her favour but she gets another 30%. 10% of that kills off any claim for spousal maintenance and 20% is offset against the pension.

Now, that 20% equity is going to be a lot more useful than 20% pension. It means she can get a mortgage of £20k less which over a 25 year mortgage at current interest rates will save her £36k in repayments. In contrast, I will have to pay that extra interest because I have a larger mortgage and I cannot access the pension to reduce my mortgage. If you go further and consider the vast gulf in equity overall, her mortgage costs are going to be around £500 less than mine per month for the next 25 years (I estimate that to be £150k in total) and it actually means my net income after housing costs is going to be a fair bit lower than hers.

I've been advised that given our ages £1 of pension is about the same as 50p of equity although I still need the pension report to be completed.

The other mistake you're making is ignoring that she can improve her own earnings.

She doesn't have to take on the majority of the parenting if the H increases his share of childcare to help her improve her earnings.

The question is whether H is willing to do so.

Spousal maintenance and mersher order, she can only dream of.

@LetsTryToHelp I am happy to do so. Obviously the more they spend nights with me the less CMS she gets but I could probably do a few extra school runs too.

Like a lot of white collar workers post COVID, I'm a lot more flexible about where I work than she is now which helps in that regard.

SM and Mesher - yes, it's not something I'm willing to entertain long term. But I'm open minded about "the transition" if anyone has suggestions I haven't thought of.

Net income per month of £3,635 after commuting costs, child maintenance and taking sole responsibility for shared debts

Surely your net income is your net income regardless of what you're doing with it after tax and NI. Commuting costs should't come in to it. Your net income is around £5700 a month not £3635

Net income per month of £3,635 after commuting costs, child maintenance and taking sole responsibility for shared debts.

Not according to my solicitor, no. Otherwise my "ability to pay" would be wrong. You cannot calculate someone's ability to pay spousal maintenance without first deducting from that income any amounts that aren't discretionary and must be paid.

Take commuting costs for example. I have to be in the office three days a week and the office is a 2 hour commute away. It costs £500 to do that commute. If I decided to stop doing the commute, I would lose my job. So it's not discretionary. Same with child maintenance. I cannot just decide not to pay it. And also with shared debt repayments. In theory I could extend the term but the dramatic rise in interest rates mean that even if I did, I might not reduce the expense.

So my solicitor said take your income, remove non-discretionary amounts that you must pay. That's my net. And for her, take her income, add benefits and add child maintenance. In theory I would also deduct non-discretionary amounts, but as she is in walking distance of her work and I'm assuming the debt, she doesn't have any.

I think you are being disingenuous by quoting your “net income”, especially including debt repayments (which can’t be that high or long term, you could just pay off). Plus I think your STBEW will be in trouble when she reaches pension age, unlike you. She is going to struggle to build any material pot whilst looking after the 3 DC 10/14.

I don't have anything to pay off the debt with though? We don't have any savings (or, at least, I don't) and I also need to take on debt to set up a new home. Bearing in mind the existing debt is for a car loan for my STBXW I think it is fair enough to keep it in to be honest.

She won't have any trouble building a pension pot if she maximises her income either. Even now she is working in the public sector and getting a defined benefit pension benefit that is surprisingly good relative to her income. Also, as we're both at least 28 years from pensionable age I think she has plenty of time to build up a pension pot. She will have significant housing wealth compared to me; in contrast I could well still be paying off a mortgage in retirement.

Hence why I said commuting costs shouldn't be discounted from net income 🙄 Child maintenance is also based on net income so to add that to it is also disingenuous.

The post should state that his net income is, at a guess, £5700 and hers is around £1200.

Everything else should have been put aftet this point imo to make it clear

OK - so if she maximises her income, then you need to take her realistic commuting costs and extra childcare from what you're saying is her income.

You also need to have down in writing how children's sick days/appointments are split - because it's all very well saying she should 'maximise her income' but that's made inordinately harder if she's also ending up dealing with every sick child and taking time off to take them to the dentist etc.

That would be quite a misleading way to look at our respective incomes. If you ignore essential costs for me to work, the transfer of child maintenance from me to her and that I am assuming all of her debt then every decision you are going to make thereafter is going to exaggerate her need and my ability to pay.

I agree. Realistically, she won't have significant commuting costs even if she maximises her income but obviously were that not to be the case then that would have to be factored in. Her additional childcare costs will also be negligible even earning £25k because she will still be eligible for UC and therefore 85% contribution to childcare, which only needs to be wraparound as they are all junior school age and above.

Sick days I'm probably much better placed to cover than she is. Her job is much more demanding on her being at her place of work, whereas I could easily WFH in an emergency. I also get 10 dependent days a year, not sure if she does. So I guess that will mostly fall on me, as it does at present.

It seems ridiculous that you're on here arguing that you're right OP, because in honesty it doesn't matter what we say.

You put forward your suggestion for asset split, your ex does the same and you negotiate. If you can't negotiate amicably, then you go to court and the judge decides.

Of course your solicitor is going to advise you deduct X,Y & Z from your "net" income; they're trying to get the best financial deal for you. Your ex's solicitor will do the same.

But as PP have pointed out, you can't deduct costs from your net if you don't do the same for the other side. And, you can't keep referring to an income or a job that your ex doesn't yet have.

She could claim you could get a promotion and earn an extra £20k next year; it's possible but that's not the figures you're currently playing with.

In short, people on here aren't going to give you any better advice than your solicitor, so keep submitting offers/ negotiating with your ex and if that doesn't work, go to court.

Yes it's a long, difficult, boring and expensive process, but that's divorce I'm afraid.

W: 39, earning £14k part time. Net income per month of £3,183 when benefits and child maintenance added to total. Universal credit element is £671 of this. Was retraining to earn more and recently graduated, has now chosen not to pursue this during divorce.

OK, so you need to drop her net income by commuting costs (assuming you stick with your 2 hour commute, that means she could likely only be in an office 2 days a week, as otherwise that's extremely extended childcare) - assuming similar commute to you, her income is now 2850. She'll also need 5 days of wraparound childcare, for 2 children (assuming secondary child can look after themselves?) - round here you'll get no change from 40/day for that, so that's another 800 during termtime, then 5 full days for 3 kids during holidays (50% of, as you cover half the holidays) - That's not even available where I am, but lets assume some kind of summercamp is at £100/week/child plus Easter, and you'll muddle through half term/Christmas - that's 2400 for holiday cover for the year, and 8400 for the wraparound - evened out that's 900/month taking her to 1950 net for her income - necessities.

Does that help see why it might not seem as fair as you think it is?

Having said that, there's a lot to be said for a clean break - but I think she's looking at all of this and just wants the housing confirmed until the kids are grown, rather than having to look forward to moving in 4 years.

Ops Ex can build a pension pot the sane way we all can - by working and contributing one

although valuing a including pension pots into the overall split needs assessing

ops ex us deliberately trying to keep income low while divorcing to try to get more.

her income should be
earnings
plus benefits
plus cms

ops should be
earning
less joint debt repayment
less cms

It’s not reasonable to expect to keep the house 14 years with op tied to it

Ops Ex can build a pension pot the sane way we all can - by working and contributing one

she can, from now onwards. But for the last 13 years she has likely minimised her earning, and pension accruing, capacity in order to support her STBXH's career, potentially also with the view that in retirement she could rely on his support.