In short, the answer to this question is “yes” but I would strongly advise against it!
In the recent case of AZ v FM  EWFC 2, the Court had to consider this very question. The parties had been married for 15 years and had one child together who was studying at University. Sadly, they had been engaged in lengthy litigation not only in the Family Court but also in the Chancery Court following their separation. The Husband had already failed to pay child maintenance previously which resulted in the Wife bringing enforcement proceedings in 2017.
Payments of child maintenance were again outstanding when the Husband had applied to vary the payments downwards. The parties had agreed:
- That they wished to deal with child maintenance until the end of their child’s first degree
- That they would not make any further application to the Child Maintenance Service (CMS) or ask the Court for any further funds after their child had finished her University degree
The Wife gave an undertaking (a promise) to the Court that if she did ask for any further child maintenance through the Court or via the CMS, and the Husband paid this, the Wife would refund him within 14 days!
The Judge then decided that he would capitalise the child maintenance ie ensure that a fund held by the parties (previously set aside to meet capital gains tax liabilities) was used to meet the Husband’s child maintenance obligations. The Husband appealed this decision and gave three reasons why his payments should not be capitalised. These were:
- His child could not be prevented from coming back to the Court in her own right for further funds
- What would happen if the assumptions made by the parties and the Court were wrong? For example, what if the child did not stay at University? What if they had used the wrong figures to calculate the lump sum?
- Child maintenance is supposed to be capable of changing depending on the child’s needs and the paying parent’s income. This cannot happen if the payments are capitalised.
As well as the reasons above, I think there are also the following problems with this approach:
- Although this is referred to in point 3 above, how will you decide how much to pay? Should your monthly earnings at this point in time be used for a calculation? If you lose your job or your pay decreases in the future, you will have overpaid. Could you live with not getting that money back?
- Should a discount be applied to your payment as it is being paid upfront? If your spouse does not have to wait for payments, then how much should your maintenance liability be reduced by? Should they be expected to invest this payment to produce an income?
- You may have more children with someone else in the future. This reduces the amount of child maintenance you should pay and, again, means you well have overpaid.
- Your child may decide to live with you in the future. It is difficult for both yourself and your spouse to cater for this eventuality. You will need to have a binding agreement when settling your finances. Your spouse is unlikely to agree to an order in which you are due a “refund” if your child changes their mind about who they wish to live with. By this point, they may have invested those funds into a property to live in and may not want to sell or re-mortgage to repay you. They may have even spent those funds and you will not be able to recover them!
- Your spouse may die before your child reaches the age of 18. If you have paid child maintenance upfront, you are unlikely to recover these funds and they will be distributed in accordance with your spouse’s Will rather than the funds being returned to you.
- You may die before your child reaches the age of 18. You may have made separate provision in your Will or through other policies to provide for your child and may not wish for there to be a doubling of that benefit.
- There may be the tragic circumstances in which your child dies before they reach the age of 18.
- Although you may agree to capitalise, your spouse may still apply to the CMS for an assessment. They may have already spent the money you have given to them and, unless your agreement specifically prevents them from doing so, they could claim twice!
- An older child may make an application for their costs for further education. Under Schedule 1 to the Children Act 1989, a child over the age of 18 can make their own application for support for their educational costs or if there are special circumstances which justify the making of an order.
- There is no provision in the Matrimonial Causes Act 1973 for payments to be capitalised unless you are applying to vary an existing order. You have to rely on your spouse sticking to the Order you agree. The Court may refuse to make your order on this basis.
Outcome of AZ v FM
Mostyn J dismissed the Husband’s appeal against the order to capitalise the payments. He also ordered the Husband to pay 75% of the Wife’s legal costs. Mostyn J ruled accepted that some predictions about the future had to be made but, in this particular case, the child was already 19 and therefore the risks were limited. The benefits of ensuring the Husband paid, in light of his previous defaults, outweighed these risks.
So should you capitalise child maintenance?
I am sure that a number of readers would want to say yes to this question. However, the real question is “are you prepared to take such a risk in doing so?”. It is only in very limited circumstances that I would advise this course of action. In the above case, Mostyn J indicated that capitalisation of maintenance cases will remain “a very rare bird indeed” as “the risks and uncertainties inherent in capitalisation will lead the court, where it has jurisdiction, to make, or continue, a traditional order for periodic payments”. Simply put, there are too many variables for such an order to be fair and monthly payments for child maintenance are more appropriate.
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