Protecting Your Wealth: Understanding child support in high net worth divorces

What is Child Maintenance?

Child maintenance is the regular payment made by a non-resident parent to the person or parent with care of the child to help pay for the child’s everyday living costs, for example, food, clothes, housing, and so on. Child maintenance is intended to ensure that both parents contribute equally towards the cost of raising a child. For the purposes of child maintenance, a child means someone who is under 16, or under 20 if they are in approved education or training.

How is it calculated?

The amount of these payments can be agreed between the parents, or if the parents cannot agree, then the amount will be calculated by the Child Maintenance Service (CMS) formula.

The CMS uses a formula based on several factors, including:

1. Gross income, which includes salaries and wages, self-employed earnings, bonuses, commissions, overtime payments and royalties, and overseas earnings if they are taxable in the UK

2. The number of overnight stays the child has with the non-resident parent, and

3. Whether the non-resident parent is also making maintenance contributions for other children.

However, there is a cap on the non-resident parent’s gross income of £3,000 per week or £156,000 per annum. Once the party’s income exceeds this amount, the CMS will provide a maximum assessment up to that level.

What if income exceeds the threshold?

In cases where the non-resident parent is a high net worth individual, it can be difficult to assess how much should be paid by way of child maintenance, as the non-resident parent’s gross income may be in excess of the CMS cap.

In these situations, an application can be made to the court to ask them to order the non-resident parent to make further payments for child maintenance in addition to that calculated by the CMS. This is known as a top-up order. This does not extinguish or replace the CMS calculation but instead tops up the maintenance payable.

When will the court make a top-up order?

The court is able to make a top-up order when:

• A maintenance calculation is already in force

• The income of the non-resident parent is in excess of the CMS threshold

• The court is satisfied that, in the circumstances of the case, ordering the non-resident parent to make the additional payments is appropriate.

Unlike the CMS, the court can adopt a discretionary approach when assessing the amount of child maintenance to be paid, and they are not bound by the formula applied by the CMS. Therefore, it is difficult to assess how much the court will award, as there is no specific sum. It will vary according to the particular circumstances of the case, and the court will need to be satisfied that the additional maintenance was required for the benefit of the child.

Pre-nuptial Agreements

It is common for high net worth individuals to enter into a pre-nuptial agreement prior to marriage, which sets out how the assets will be divided in the event of divorce. Couples can agree on the level of child maintenance to be paid within this agreement; however, it is important to remember that a court will prioritise the financial security of children when making any financial orders, so they can override a prenuptial agreement to ensure a child is provided for.

How can we help?

It is best to consult the CMS calculator to find out what you should be paying or receiving by way of child maintenance. If there is a disagreement on this, the CMS should be contacted. We can also assist you in your child maintenance negotiations and provide advice and assistance with an application for a top-up order.

If you are struggling to agree on the level of maintenance to be paid with your ex-partner for your child, please get in touch for a free 15 minute telephone consultation.  I can be contacted on 01245 453810 or via email claudia.hubert@birkettlong.co.uk.