With the ever-rising costs of childcare of something in the region of £1,250 per month per child full time until the age of three for most families, and a UK average income of £29,600 per year (£1,950 per month), it is hardly surprising that many families make the decision for one parent to stay at home or reduce their hours. It is an emotional dilemma that so many parents face.
What does this mean for the person who gives up work if they later separate from the other parent? Are they protected?
If you are unmarried
In England and Wales, there is no such thing as a common law spouse. This means that your rights are far more limited if you separate. This often comes as a surprise to many separating parents, including those who have made life decisions to support their growing family.
If you are unmarried, and later separate, then there are no claims that can be made against the other as a result of the relationship. The working partner will not have any ongoing financial obligation to help make up any shortfall in the income of the person who gave up work. The rights and responsibilities are limited to those relating to the child, so for income purposes this usually extends to child maintenance only. Child maintenance is only payable if one parent has the child(ren) for less than 50% of the time, and it is generally set according to a statutory formula unless the paying parent earns more than £156,000. This often does not provide very much income per month.
One way to protect against this, could be to enter into a living together agreement with the other parent whilst still in a relationship, to set out where you would live if you separated, but also setting out any agreement for ongoing monthly sums to be paid after separation, perhaps to allow you time to get back on your feet or to find employment, or confirming how subsequent childcare costs will be shared to enable you to return to work. It is also sensible to have something documenting the arrangements for ownership of the home you live in – particularly if the property is not jointly owned.
If you are married
If you are married and separate, then different considerations apply and there is a little additional protection. Depending on the length of the marriage and whether you have children, and the income of your spouse or civil partner, then if you separate there may be some additional obligation on them to provide sums over and above child maintenance to allow you to adjust to financial independence. The amount and length of this additional money will depend on your circumstances, including the level of the working partner’s income, your own income and earning power and how long it is likely to take you to get back into paid work. Both parents have an obligation to maximise their earnings, but health concerns, taking a career break or having a young child can influence this.
If one of you gave up a lucrative career to provide care of the children, to allow the other to flourish in their success there may also be arguments that can be raised when it comes to dividing the cash assets – in very rare cases for an additional sum of compensation. If you do decide to give up a lucrative career to care for the children, it can be helpful to have evidence of this being a mutual decision giving rise to relationship-generated disadvantage.
If one of you has a particularly high income or you have a reasonable amount of assets to warrant this, you could also consider a relationship agreement (a pre or post-nuptial agreement) which sets out any agreement you have about future sums which will need to be paid to you if you separate, if you do make the mutual decision that you will give up work to raise your children.
It is sensible to take advice about all key life decisions, both from a lawyer but also a financial adviser, to ensure that the decisions you take as a couple work for you both, both during the relationship and in the unfortunate event of a relationship breakdown.
For more details about the article above please contact Samantha Newton.