Protecting Divorce Maintenance Payments

Even if you are divorced (or going through the process), protecting the family in the event of your death should still be a priority. If you think about it, if you were still married you would want to know that your family was protected if you died. Just because you no longer love your ex-spouse does not mean that you would still want to protect your children. At least they still love you!

One possible way of thinking about this is the amount of maintenance you pay and capitalising this amount to give the total amount needed to ensure that they still get their money if you die.

And talking of the maintenance you pay, if you think about what you have agreed to in your financial settlement and you are paying both spousal maintenance and also child maintenance, this might be agreed as separate amounts. This might be specified in your Consent Order. You may want to set up two payments from your bank account so that each payment can be evidenced, rather than merging both payments into one (even if they are being paid to the same bank account) such as your ex-spouse’s. Although this might be a bit of extra hassle, it may make things clearer if there is a dispute at a later date and payments records are required or if maintenance payments are to be adjusted.

Protecting your payments

Maintenance is usually paid by standing order from the payer’s bank account, but in certain circumstances it can be capitalised as a single payment to the recipient in advance so that he or she is not reliant on the payment each month. This may give the holder of the maintenance some additional security and, from another point of view, some maintenance payers prefer it this way because it keeps contact to a minimum.

For those who have agreed to pay a regular maintenance payment, they may also be required to take out life assurance cover to protect the maintenance payments if they should die in the early years, leaving a family without income. In certain circumstances one ex-spouse takes out life cover on the other. The insured ex-spouse will have to co-operate as medical underwriting may be required and he or she will need to sign the life assurance application forms and fill in the medical questions required. If the spouse is taking the policy out on the life of the ex-spouse then he or she is insuring ‘The life of another’. If the cover levels you require are high, then the medical underwriting may take a little time so make sure that you start the process with time to spare. Most Life Assurance applications can be resolved and completed in around six to eight weeks.

The maintenance receiver pays the premiums for the life cover. This gives the person who receives the maintenance the protection of knowing that the life cover will remain in place and that the premiums required will not stop when no one is looking (or placed in Trust to someone else) because the proceeds will always be paid to the policy owner.

Speak to your financial adviser about the cost of this protection before requesting this as part of your settlement in case the premiums required for the cover are prohibitive. They may also be able to use an existing protection policy, if available and appropriate.

To expand on all things divorce and the fundamentals, I have been able to outline the full process in my new book, Addicted to Wedding Cake, The Journey of Divorce.

Further details of this new book are available at our websites, www.addictedtoweddingcake.co.uk or on Amazon here.

Speak to Churchouse Financial Planning Limited (or your independent financial adviser/ IFA) to help with advice on this issue. This statement is not individual advice and should not be relied on because each clients circumstances are different.

Keith Churchouse

Director, Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority