I was asked this question recently in mediation. As a mediator my immediate response was “ you can look to do whatever you both agree and we can then look to see how we package the law around this” However as a lawyer I had resounding alarm bells given you simply cannot have what we call a financial clean break from our children and therefore no matter what financial arrangement you come up with it is always possible to make further claims on behalf of your children when demonstrating a need or if the correct amount of maintenance is not being paid. There are ways around this with clever drafting of clauses to protect your respective interests but it all comes with risks.
In a world of unknowns, Furlough and changing financial landscapes I am finding more and more people are looking to be creative with their financial settlements to help them create the financial security they would prefer as opposed to what may have happened traditionally. To do this however if the law cant protect the option you seek then this comes with risks, if people were to subsequently change their minds and may well be based upon Trust which is often lacking by the time people enter a lawyers office.
Since 1998 courts have had the jurisdiction to capitalise spousal maintenance. For some it may well be preferable to receive a lump sum which significantly reduces the mortgage and therefore there outgoings rather than be dependent upon an income coming in on a monthly basis which may be variable at any time. In these circumstances you may agree to receive a reduced lump sum which helps to meet your needs as opposed to the risks which can flow from a maintenance order, particularly in the current financial climate with the onset of the Pandemic. The reverse being the paying party in this particular circumstance gets their name off the mortgage, secures their income and can move forward financially independent from their ex.
Until recently I didn’t think this could realistically be an option for child maintenance. However, it appears our judiciary are also looking at ways in which they too can be innovative in creating judgements which are “ fit for purpose”. In a recent case called AZ v FM  EWFC 2, Mostyn J, considered whether or not the relevant section governing spousal maintenance , S31 Matrimonial Causes Act 1973, could also apply to child maintenance. Whilst s31(7A)-(7H) explicitly relate only to spousal maintenance, the Family Law Act 1996 introduced s31(5) and Mostyn J considered whether or not this specific provision empowered the court to capitalise child maintenance by way of a lump sum order.
Ordinarily there are three main reasons for the prohibition on capitalisation of child maintenance:
- Unlike applications for spousal maintenance, applications for child maintenance cannot be statutorily dismissed, so the child cannot be prevented from making a further claim after capitalisation.
- The child’s circumstances may change; for example they may move to live with their other parent, or drop out of university.
- Child maintenance is intended to be variable based on the paying parent’s income and the child’s needs. This is precluded if child maintenance is capitalised.
These points however question whether it was appropriate for child maintenance to be capitalised, rather than to the question of whether the jurisdiction to capitalise existed. Mostyn J considered the proper interpretation of s31(5). The subsection currently reads as follows (emphasis added):
Subject to subsections (7A) to (7G) below and without prejudice to any power exercisable by virtue of subsection (2)(d), (dd), (e) or (g) above or otherwise than by virtue of this section, shall be made on an application for the variation of a periodical payments or secured periodical payments order made (whether in favour of a party to a marriage or in favour of a child of the family) under section 23 above, and no order for the payment of a lump sum shall be made on an application for the variation of a periodical payments or secured periodical payments order in favour of a party to a marriage (whether made under section 23 or under section 27 above).
Mostyn J held that this sub-section means that whilst the court cannot, on an application to vary spousal or child maintenance, make a property adjustment or pension sharing order, and cannot, on an application to vary spousal maintenance, make a lump sum order, there is no equivalent prohibition on making a lump sum order on an application to vary child maintenance.
The language is completely clear. Where the application is to vary a periodical payments order in favour of a child of the family then there is power to award a lump sum. He added that where a variation application relates to child maintenance, s31(5) “permits” the court to discharge the order and instead order a “commutation payment”. Mostyn J ” that an order capitalising child maintenance would be “extremely unusual”, and that he had no memory of ever encountering one, but noted that this did not mean the court lacked jurisdiction to make such orders.
So the answer to the question “Can I capitalise Child Maintenance?” is a resounding Yes. However, it must always be noted that, unlike spousal maintenance claims, claims for child maintenance cannot be dismissed. Mostyn J addressed this by providing that “where the court has made a capitalisation of child maintenance it would need a change of circumstances of exceptional magnitude before the court would augment what was intended to be a one-off commutation payment”.
What it does however mean is that when looking at your financial options on separation consideration can be given to such a lump some and exploring the pro’s and cons of this and if you do choose to go with this then you do so knowing the implications and risks that may go with it.
Legal advice or Mediation can help you to work through the legal maze that goes with such issues. For more information contact one of our family specialists here https://lawtap.com/uk/secure/law-firms/174-family-law/lawyers