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Maintenance IncomeProtection OptionProviding advice & assistance for all your financial matters

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Protecting your Maintenance Income

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Child maintenance is about more than just money. While there’s no doubt it can make a real difference when it comes to paying for clothing, food and other essentials, it also helps keep both parents involved in their children’s lives

It’s not easy knowing what to do and what should take priority when you’re splitting up, especially if you have children

Have you considered how you would manage if the maintenance income you recieve for you and your children suddenly stopped?

If your partner doesn't pay then you have a legal recourse, but if they are unable to pay then what can you do?

When there are children involved in a divorce or separation it is especially commonplace to set up legal arrangements for maintenance income. But, many parents overlook protecting those payments in the event of the payer's serious illness or death. If the parent making the maintenance income payments suddenly died or became seriously ill, the payments the family relied upon would almost certainly stop.

One solution would be to organise some life assurance protection and critical illness cover on the person making the maintenance payments. This solution could be orgainsed by either of the parents in line with their financial obligations.

At Financial Options we can offer parents and even separated couples our Maintenance Income Protection Option which will provide an income should the person paying die or develop a critical illness, ensuring that you will continue to receive your maintenance income.

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Child MaintenanceChild maintenance is about more than just money. While there’s no doubt it can make a real difference when it comes to paying for clothing, food and other essentials, it also helps keep both parents involved in their children’s lives.

Child maintenance is regular financial support towards the cost of raising your child. It’s paid by your child’s other parent if you’re no longer together and either your child doesn’t live with them or spends more time living with you.

But, what if they can't make the payments due to ill-health or worse?

Either the parent paying the maintenance or the parent who receives it can take out life insurance or critical illness cover. You would insure the parent responsible for paying the maintenance, and the amount of insurance would be sufficient to cover the payments that would be lost.

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More than half a million children in the UK benefit from maintenance arrangements agreed between both parents, without using the Child Maintenance Service or the courts.

That means no legal recourse in the event of non-payment, but at least steps can be taken to ensure that you will still receive an income if the non-payment is as a result of illness or death

All parents want what's best for their children even if they don't live with them. Child maintenance is regular, reliable financial support that helps towards your child's everyday living costs. The parent without the main day-to-day care of the child pays child maintenance to the other parent

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Spousal MaintenanceSpousal maintenance is an amount, awarded by the courts to be paid by the spouse or civil partner with the higher income to the other, with the lower income, on divorce or dissolution. It is only awarded if one party cannot support themselves without payments from the other.

Maintenance for a spouse or civil partner depends principally on the potential recipient's needs, own income and ability to earn income. There are no set formulas and the amount payable depends on the payer’s net income, among other factors.

If there is any income left over after the needs of both of you have been met, extra maintenance can be ordered if the judge thinks the person receiving it should benefit from that extra income, for example as compensation for giving up a highly paid career to bring up the children.

But, what if they can't make the payments due to ill-health or worse?

Anyone in receipt of spousal maintenance should also consider insuring the life of the person paying for it, to ensure they are provided for in the event of that person’s death or critical illness. This is because spousal maintenance can be more important as it can last a lot longer than child maintenance.

Separation or divorce can be expensive. And living on your own after sharing your household expenses can be costly. Understand how to sort out your money issues to help make ends meet. You might find that working out the finances helps you take the first step towards building a good parenting relationship together. It'll help your children to know that mum and dad are creating a secure financial future especially for them

Spousal maintenace seek to prevent a divorced or separated spouse from suffering from a decrease in their standard of living. Often times after divorce, one spouse is untrained or has been out of the workforce for such a significant amount of time that it would be difficult, if not impossible, for them to quickly attain a job or professional position that would allow them to maintain the standard of living that they may have had while they were married.

You may want to consider other forms of maintenance insurance, depending on your ex-spouse’s circumstances. For example, you could face problems if your ex-spouse is made redundant or can no longer work for some reason.

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The Financial OptionMaintenance payments can be protected by arranging life and/or critical illness cover under a Maintenance Income Protection Option. If your partner died prematurely or became critically ill and was unable to make the payment each month, the children and yourself would continue to be cared for financially.

Maintenance Income Protection would be able to provide flexible separate cover for each and every child as well as yourself. Typically any maintenance payments would stop once the children reach the age of eighteen respectively; although flexible cover could be extended to cover their college and university years. It is also possible to protect maintenance income payments from inflation by incorporating indexation into the arrangements.

This is really a relatively inexpensive type of cover that can provide you with the peace of mind of knowing that you and your children will never be financially disadvantaged.

Can you really afford to ignore it?

Using life insurance to provide an income for your family

While lump sums are ideal for paying off mortgages and other debts, there are advantages to policies that pay out a regular monthly or even annual income instead:

• Lower policy premiums • Guaranteed income that can be linked to inflation• You know you'll receive a regular set amount rather

than having to worry how to invest a lump sum, as well as the risks and investment return

• You won't run the risk of spending all the money at once and can budget accordingly

• You can choose the level of cover you need• You can make sure your family won’t need to

change their standard of living

We are all aware of the impact of rises in the cost of living. Food prices and petrol all go up but very seldom down. If you are reliant upon maintenance income payments following divorce or separation, then the real value of those payments is going to decrease over time as the cost of living rises. Unless, of course you are able to link the maintenance payments to the increases in inflation.

To get the level of life insurance or critical illness cover right, you need to work out how much cover you need to protect your loved ones, and also make sure you can afford to keep paying the premiums.

To discuss this type of arrangement in more detail please contact:

Financial Options on +44 (0) 1624 612611 or via email at MIPS@financialoptions.co.im

Contact UsIf you would like further information regarding Financial Options and our services available, please feel free to contact us at the address below:

Financial Options10-12 Prospect HillDouglasIsle of ManIM1 1EJ

Telephone: +44 (0) 1624 612611Fax: + 44 (0) 1624 628523Email: advice@financialoptions.co.imSkype: financialoptions

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Chase Financial Services Limited trading as Financial Options is registered in the Isle of Man No. 084203C and is licensed by the Isle of Man Financial Supervision CommissionChase Financial Services Limited is registered with the Isle of Man Insurance and Pensions Authority in respect of general business

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