Post-divorce, a common question partners tend to ask, ‘is my ex entitled to a share of my future earnings?’ Picture this: you’ve gone through a divorce and face the prospect of having much lower earning ability than your former spouse. Perhaps you were the homemaker and took time off to raise children; perhaps you parked your career in order to support your spouse in theirs. Whatever the reason, you suddenly find yourself faced with difficulty meeting your living costs, while your former spouse is sitting pretty. You find yourself having to live on the capital you brought from your marriage, while your ex is able to save theirs and live on their income.
From the point of view of the higher earning spouse, things may look very different. If you are keen to put the broken relationship behind you and your ex says you need to provide an ongoing portion of your income and future earnings as financial support, this can be a big blow – especially if the divorce is a bitter one.
These scenarios have played out in the family courts with interesting results. In Waggott v Waggott  the wife argued that the earning potential accrued by her husband in the course of their marriage was a product of the marriage and that therefore he should share his ongoing income with her. The judge said that meeting the wife’s demand would prevent the court from effecting a clean break, and that it would be a challenge for the court to establish how much of her husband’s earning capacity had built up during the marriage. It was also pointed out that her argument could be applied to any divorce case in which the other partner was the higher earner.
The agreement of a lump sum is a key factor in enabling the court to effect a clean break: a method known as the Duxbury calculation is used to determine a lump sum that can be drawn on by the lower earning partner to pay for maintenance for the rest of their life. The Duxbury Tables, used for making this calculation, take into account factors such as life expectancy and inflation. This approach comes from the 1992 divorce case of Duxbury v Duxbury. The husband and wife both wanted a clean break and lawyers proposed a lump sum.
A criticism of the Duxbury method is that it can mean that a young spouse, divorcing after a short marriage, receives a larger sum than an older spouse who has had a long marriage, during which they have made a more significant contribution to marital wealth. This is known as the ‘Duxbury Paradox’, and it’s something that judges take into account.
In Waggott v Waggott the wife’s counsel took the ‘extreme’ position of arguing that it would be unfair for the wife to have to live off her capital share while her husband would be able to keep his capital share and live off future earnings.
The judge acknowledged that the law cannot be categorical on this issue, but said that the level of the husband’s income would be a relevant factor when considering how the wife was obliged to make use of her capital. “As to the specific issue raised in this case, namely whether it is fair for an applicant spouse to be required to use their sharing award to meet their income needs when the other spouse will meet their needs from earned income, the answer is that the latter factor will be relevant to the court’s determination of the former issue,” he said.
In the 2019 case of O’Dwyer v O’Dwyer, judge Francis J said that the Court of Appeal’s decision in Waggott “left a substantial element of discretion in this respect”. Francis J added: “It is my view that, in a bigger money case, after a long marriage where contributions are likely to have been equal, if different, if the economically stronger party… has a very substantial income, it is fair to determine that the economically weaker should not have to amortise their capital for a period of time.”
Francis J’s suggestion implies that the wife should not have to live on her capital while her husband is still earning but that after the husband retires the wife could be expected to draw an income from her capital.
Ultimately, there is no hard and fast rule on future earnings in this type of situation. Factors such as money the spouse may have inherited can also play a part, along with factors such as the length of the marriage and the amount the other spouse earns.
For more information on family law matters, contact Robert Williams on 01639 646 792, Robert.Williams@hutchinsonthomas.com