What happens when there is a big difference in income?

It is not uncommon for there to be one party to a marriage or civil partnership who earns more than the other, sometimes substantially. This might make it very difficult for the lower earner to see how they will manage financially if they go their separate ways. At the outset I can stress that the law on asset division does not discriminate between the parties based on who earns the most, and certainly does not treat the homemakers contribution as less than the main breadwinner's. During the marriage/civil partnership everything is viewed as a joint enterprise, and credit is not given for who paid the mortgage or most of the bills.

In most cases though, the law does not take the approach that just because a party was supported by the other during the marriage, they will be supported forever more. A party is expected to do what they can to maximise their earning potential where appropriate, and specifically section 25 of the Matrimonial Causes Act 1973 lists various criteria to be taken into account, one of those being:

the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire (bold emphasis added).

Of course that is not to say that a stay at home parent who has never worked beyond minimum wage is going to be expected to be able to go and earn the same as their City Stockbroker spouse, but they will likely be expected to do what they reasonably can if they are of working age. With young children, or children with additional needs, that might be limited, and there may be any number of reasons why a person's earning capacity will be limited.

One thing that we lawyers have to grapple with is how to make the outcome fair, so that as the parties go their separate ways, the person with the lesser income does not find themselves in a much more disadvantaged situation in terms of their options on housing, living costs and so on.

Ways we might do this include the following:

• it might be that the lower earning party will be housed mortgage free or with a much lesser mortgage compared to the higher earning party. This is because a mortgage capacity is linked to earnings, and is a resource available.

  For example, if the assets of the marriage total £400,000, and each party needs, say, £450,000 for their next home, then if one person has a mortgage capacity of £350,000, and the other only has £150,000 mortgage capacity, it would produce an unfair outcome to divide the assets 50/50. One person would have £200,000 plus their mortgage capacity of £350,000 (total £550,000), and the other would have £200,000 plus their mortgage capacity of £150,000 (total £350,000).

  One would be able to house, the other wouldn't. An adjustment to the percentages on the capital though, would make things more fair. For example, if the person with the £150,000 mortgage capacity received £300,000 they could meet their housing need. And so could the other person, with £100,000 plus their mortgage capacity of £350,000.

• Another possibility is maintenance. If there are children, then child maintenance may well be payable, assuming the children are with one party more than the other. This is calculated by a formula. Maintenance for an adult party is more related to needs and affordability. It is, in most cases, restricted to meeting reasonable needs.

  If one party has been housed mortgage free or with a smaller mortgage, their outgoings will be lower, and this may go a significant way to redressing the imbalance. The party with the higher mortgage will have higher outgoings, and this might mean that spousal maintenance is neither affordable or needed.

• Sometimes spousal maintenance might be capitalised, with a person receiving an additional capital sum instead of spousal maintenance, in cases where maintenance would otherwise have been payable.

• With older parties, sometimes drawing pension now, including from pension shares, might meet a person's reasonable income needs instead of maintenance.

Certainly, the days of long term or joint lives spousal maintenance are largely gone. It is a rare case for long term spousal maintenance, and in recent years the trend has been for courts to limit such claims far more than in the past. Spousal maintenance claims are usually limited now in duration to a time when the courts expect the person to be able to be financially independent.

Sometimes the money simply is not available to achieve everything that is wanted when making one set of resources stretch to cover two households.

When acting for the higher earning spouse, I always advise on the desirability of a clean break to give certainty. All the while a spousal maintenance order is "live" it can be varied upwards or downwards if circumstances justify that, and it can even be capitalised or turned into a pension share. That is not to say any of these variation options are easy, but ongoing spousal maintenance does leave a lack of certainty. Most parties will want to achieve a clean break where possible, perhaps by giving more capital so that the other person has lower outgoings, but sometimes it is not possible.

Each case is different, and it is important to take proper legal advice on issues such as maintenance. If you would like to get in touch for a chat, please do so here.