Family courts could be on the brink of changing how they calculate capitalised spousal maintenance – the lump sum awarded to a financially dependent spouse in lieu of ongoing payments after a divorce, a change that could result in lower one-off payments to spouses of UHNWs.
This update follows recommendations in a new Duxbury Working Party report that suggested the Duxbury tables, which have been the basis for calculating capitalised spousal maintenance for the last 40 years, are outdated.
Duxbury calculations have been used by family courts for decades to agree on a lump sum to be paid to the financially dependent party to provide for a clean break divorce in place of regular maintenance figures. Under the current guidelines, if invested correctly, this one-off payment would be expected to last until the end of the recipient’s life.
The final report of the Duxbury Working Party was published on 25 November 2024, and sets out the findings of the committee that included Lewis Marks KC (Chair), Sir Nicholas Mostyn, Joseph Rainer, Sarah Hoskinson, Michael Allum, Simon Bruce, and Mary Waring.
The report set out seven main recommendations (it will be up to the court to decide whether to adopt them). One of its arguments was that the financially stronger spouse should not be obligated to provide lifelong income to their ex-partner because they chose to pay in a single instalment. Instead, they should pay a reasonable amount to help the recipient adjust to a new lifestyle. The Duxbury Working Party argues that this reduced payment is comparable to what the recipient would have received through regular monthly spousal support.
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Lump-sum amounts to compare with periodical payments
Capitalised spousal maintenance is the preferred option for couples wishing for a clean break after a divorce. Instead of regular spousal support, usually in the form of monthly payments, a single lump sum is paid to the financially weaker party as part of a divorce agreement.
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Historically, those periodical payments were made on a ‘joint lives’ basis, meaning they would occur monthly for the rest of the ex-spouses’ lives, or until one of them would experience a relevant change in circumstances such as death or remarriage.
However, in the past decade, courts have been ‘much tougher about divorce being a meal ticket for life,’ Sarah Hoskinson, a partner at Burges Salmon and a member of the Duxbury Working Party tells Spear’s.
She says there has been a shift away from ‘joint lives’ orders in favour of promoting financial autonomy for the payee; most periodical maintenance programmes now only apply for a limited number of years.
But this adjustment has not been applied to Duxbury tables. As the calculation of lump sums to be paid at once is still based on the ‘joint lives’ principle, one of the factors included in the calculation is the payee’s life expectancy, resulting in particularly high amounts of money to be capitalised.
The report recommends that the calculation ‘should no longer default to the life expectancy of the recipient’, but rather the court should determine an appropriate lump sum payment based on the likely duration of the periodical payments order which is being capitalised.
According to the Duxbury Working Party, this would end ‘decades-old inequity’ where the recipient would receive a greater financial settlement than they may have done had they opted for the periodical payment route.
[See also: Spousal maintenance: which is the most generous jurisdiction?]
‘Promoting fairness’
The report argued that the capitalised maintenance should also include an allowance for management charges and that the outcome should no longer rely on the assumption all payees would get a full State Pension. While these changes could potentially increase the lump sum, the committee argued any rise in awards would be mitigated by the cap on the duration the recipient would receive maintenance.
These directions – a tool, not a rule – are ‘about promoting fairness’ as they ‘level the playing field’ between all types of divorce agreements, Hoskinson tells Spear’s.
Recommendations for financial advisers
The Duxbury report also highlights the role of advisers to UHNWs, from family lawyers to financial planners, in ensuring their clients have a ‘proper understanding of the basis of the calculation’.
Hoskinson added that ‘family lawyers need to remember to give clear guidance to clients’ and that financial advice is ‘essential’ for the recipient client. She also stressed the importance of a close collaboration between all parties involved at a ‘very early stage’ of the divorce process.
While still at the recommendations stage, the report is already having an impact. Just a few days after the report came out, Hoskinson said the new recommendations were mentioned in a divorce case in court. ‘It will get traction in court,’ she says.
[See also: Landmark divorce ruling puts the ‘sharing principle’ in the spotlight]
