Smart Separation

Finality versus Alimony: Are we applying the wrong test?

When a family law settlement is finally done, most people experience relief, even if mixed with some negative sentiment. For income-poor spouses, the balance often swings way to the negative. This is an important conversation we really haven’t faced up to in Australia. And yes, it is very much about gender.

Finality is one of the goals of the Family Law Act, and is typically a good thing for spouses with income, potential income or good assets. For them, it is attractive to have a new financial beginning.

For ex-spouses who have little or no income, and few or no prospects, their financial future can range from bleak to terrifying.  Instead of finality being a benefit, it can be the start of years of ‘the grind’.

The truth is, our family law system does not perform well in looking past the immediate ‘deal’, part of which is our insistence on capitalisation of spousal maintenance as a norm.

In average and above average asset pools, capitalisation of spousal maintenance by the lazy approach of a 5-10% adjustment, is nothing more than a nod to providing “a standard of living that in all the circumstances is reasonable”. There is no absolute criteria for determining what is reasonable, no financial science involved, and most often an inequality in bargaining power. In my opinion, any determination of a reasonable standard of living is an impossibly subjective assessment. It will be judged by history, it will be coloured by relational dysfunction, judgment, control, and the financial personality of the lawyers and judges involved.

We have fallen for finality over equality, and I think the ‘alimony’ conversation is one we need to have. It is time we looked at enabling greater equality between separated households, without financially crippling the higher income earner at settlement.  I can see no reason why finality and ongoing spousal maintenance payments (‘alimony’) cannot co-exist. Certainty about future payments is a final determination, and surely the point of finality is less about financial severance than it is about certainty and the prevention of ongoing negotiation/conflict/proceedings?

We accept the necessity of ongoing child support, which is never protested because who is going to admit to not caring about the wellbeing of children? Why are we so ready to ignore the wellbeing of poorer spouses? I suspect it is largely that they are most often women, and we accept the structural issues that mean women usually earn less than men, and poorer women are commonplace. This is an unpalatable truth and the family law system is complicit, when it could be an agent of change.

I’m interested to know how other practitioners see this issue in their daily practice.