Sharing the wealth

By 3 April 2013Children, financial

Our Twitter feeds are awash with concern about this week’s benefit changes, and their likely effect on children’s future prospects. For many parents who live alone with children, the other parent of their children may be in a no better position than they are, and if nobody has enough to make ends meet then the financial options are obviously limited. However, sometimes the children’s non-resident parent is doing well, while the children and the parent who looks after them are struggling financially. We thought now might be the time to make it clear that if the parent living apart from the children has some money – income or capital – the law does offer some opportunities for spreading the wealth around to allow any children to benefit from it.

If a child’s parents are or have been married or in a civil partnership, there are a wide range of options for redistributing the family wealth available on divorce or dissolution. Here, the focus is always to provide the children with secure housing and the parent who lives with them with enough money, as a first priority.

Where the children’s parents haven’t been married or in a civil partnership, things are more complicated. There are two main legal options.

The first option is child support. We’ve written about this on the blog fairly regularly. The fundamental principle is that each parent of a child has a legal responsibility to contribute to the child’s financial upkeep, whether or not the child was planned, and whether or not a parent has a relationship with the child. This applies both to formerly married and to never-married parents when they no longer live together. The child support system translates that principle into financial terms and sets out the state’s expected levels of contribution by a parent who does not live with their children, according to their income.

Currently, the system is in flux, changing from one based on the net income of the parent who lives apart from the children, to one based on gross income which (it is hoped) will be fairer. The website Child Maintenance Options is a good place to start to help both parents work out how much they are expected to contribute or receive in child maintenance, and gives useful advice on how to structure a discussion and keep emotions in check when talking about it (if it’s possible to do so at all).

The CM Options website puts the emphasis on parents working out together what’s right for the children, rather than involving the child maintenance service in either the assessment or the collection of maintenance. However this isn’t always feasible, and parents should be aware that the child maintenance service (formerly the CSA) is still available to assist and is, at the time of writing, still free to use. There are proposals to bring in charges for the service and it is likely these will come in during this year or the next.

The second option is an application to the court under Schedule 1 to the Children Act 1989 for financial provision for a child. This allows a parent who lives with a child to obtain a lump sum, housing provision or even a transfer of property from the child’s other parent, if there is money available. The court can also order regular payments if the net income of the parent who lives apart is greater than £104,000 per year,* where the ability of the child maintenance service to take it into account ends, or for school fees. [*2.6.14 Update: the new scheme is based on gross income and ends at a gross income of £156,000 or £3,000 per week.]

Realistically, Schedule 1 only tends to be useful where the non-resident parent has some degree of available wealth, but if that is the case then the difference it can make to a child’s living standards can be significant. The court is concerned to see that a child’s home circumstances reflect, to some extent, the living standards of a wealthy parent. It is irrelevant whether the child was planned, and the length of time that the parents were together is not taken into account in any way.

The important thing to remember about a Schedule 1 claim is that any settlement will be focused on the child. This means that any financial support will only usually last until the child reaches age 18 or finishes school or university. The same usually applies to property: in most cases, the parent who looks after the child is effectively loaned a sum of money to spend on a house, or a property to live in, until the child grows up when it must be returned to the other parent. Usually when the child becomes an adult, the resident parent is put back into the same position as they were in before, as the other parent’s obligations were, legally, only to the child. Nevertheless, for some parents and children with no access to the wide powers of the court on divorce or dissolution, an order made under Schedule 1 can make a real difference.

We’ve talked about what a court can do, but it’s important to remember that an application to court might not be necessary. Solicitors can negotiate a settlement in many cases; mediation can be really effective for working out children’s arrangements even where finances are concerned, and it is also possible to use collaborative law to work through these issues.

If you have any queries about financial support for children after the breakdown of a relationship, do give Gail, Sue, Adam or Simon a call on 01223 443333.

 

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