It is not uncommon to find parents continuing to pay an allowance to their children into adulthood, and in some cases this support continues after their children have married and can include payment of school fees for grandchildren or other financial provision paid on a regular basis. How external support treated on divorce?
Judicious Encouragement of third parties
Parents who continue to provide ongoing financial support to their adult children after their children’s marriage may find they are the subject of ‘judicious encouragement’ for this financial provision to continue post-divorce.
The court shall have regard to ‘all the circumstances of the case’ and is specifically directed to the ‘income, earning capacity, property and other financial resources that each party to the marriage has or is likely to have in the foreseeable future’ (Section 25(2)(a), Matrimonial Causes Act 1973).
Property is widely defined and includes real property, personal property, financial investments, stocks or other business assets or beneficial interests. The court has wide discretionary powers and will look at the actual financial resources a party has available to them, even if in some instances this may involve making orders on the assumption that third party financial assistance will continue. This has become known as judicious encouragement of third parties.
How is external support treated on divorce?
In Thomas v Thomas  2 FLR 668, Waite LJ stated that: ‘where a spouse enjoys access to wealth but no absolute entitlement to it (as in the case, for example of a beneficiary under a discretionary trust or someone who is dependent on the generosity of a relative) …. there will be occasions when it becomes permissible for a judge deliberately to frame his orders in a form which affords judicious encouragement to third parties to provide the maintaining spouse with the means to comply with the court’s view of the justice of the case’.
The availability of external resources enables the court to be more generous to an applicant when distributing the parties’ assets, if it believes any shortfall in the payer’s resources will be ‘’backfilled’’ by a third party. In AM v SS  EWHC 865 (Fam) the judge made an award to the wife in excess of the husband’s resources where he was confident the husband’s wealthy father would meet the shortfall.
Conversely, where a party has a ‘safety net’ in the form of third-party support the award might be less generous. In M v M  EWFC 41, rather than approaching the issue as a matter of judicious encouragement, the judge made a finding based on the family’s previous support and based the award on the wife’s family providing financial assistance to buy her and the children a suitable home. The court must have clear evidence of a track record of historic payments or reliable representations of future help to be satisfied that third-party assistance will be provided and can be considered a financial resource.
This case was highly contested and involved multiple hearings. By the time it came before the court for final determination the parties’ combined legal costs were £594,000, this representing 94% of their liquid assets. The judge described the proceedings as ‘a calamitous waste of costs…ill-judged and disproportionate’. This case is a stark reminder of the benefit of pre and post-nuptial agreements. These agreements enable a couple to plan for their needs in the event of separation and avoid the stress and costs of litigated proceedings.
Family and friends may also offer financial assistance during the divorce itself by paying for legal fees. If it is intended that these fees should be repaid at the conclusion of the divorce and not treated as a gift, it is essential for a loan agreement to be entered into.
Watson Morris Family Law
At Watson Morris, we support our clients in all areas of family law including divorce and pre/post-nup agreements. For more information, contact the team today.
Written by Caroline Watson
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