The end of a marriage can cause anxiety for everyone involved. A common concern is about maintaining a certain lifestyle that may have been enjoyed during the marriage.
The recent celebrity divorce of Kevin Costner and Christine Baumgartner — the subject of numerous news reports — highlights some of what a court may need to consider when assessing needs.
For example, it was reported that Mr. Costner offered Ms. Baumgartner $30,000 per month in maintenance until she could find alternative accommodation.
In respect of the children, it was reported that the court ordered Mr. Costner to pay to Ms. Baumgartner interim child maintenance of $129,000 per month.
Financial proceedings on divorce look at dividing the capital assets to meet both parties’ capital needs.
This usually includes housing needs, paying debts and possibly funding a retirement, if there are reasonable pension provisions in place.
Once the court decides what capital provisions can be made for each spouse, it then considers if one spouse needs spousal maintenance from the other to assist them to meet their needs.
The Costner v Baumgartner case is an example of a divorce where the spouses have very different asset holdings and future earning potentials and where one spouse would be dependent on financial support from the other spouse to maintain the lifestyle they enjoyed while married.
The court may have to assess what Ms. Baumgartner needs long term, as well as the needs of the children.
This case will no doubt rumble on in the US for a long time but we can examine what a court might do in Bermuda when assessing maintenance and if a lifestyle can be maintained following a divorce. (The Costner v Baumgartner case also involves a prenuptial agreement but that is a topic for another day.)
In respect of spousal maintenance and court orders in Bermuda, the judge will consider the lifestyle that a married couple enjoyed during their marriage when assessing a fair settlement.
If the couple’s assets and incomes are modest, the divorce will inevitably affect both their lifestyles negatively. The greater the couple’s assets and income, the more likely they will reach a financial settlement that allows them to continue the lifestyle that they had during the marriage.
When dealing with the financial aspects of divorce, it is usual for both spouses to provide information about how much they might need to buy or rent a house.
Where there is less capital, both parties may have to sell the family home and downsize or move into more modest rental accommodation as part of their divorce settlement.
However, if there are more assets, one party may be able to keep the family home and the other could purchase another property of a similar value. The value of a house that is suitable for each spouse depends upon the couple’s assets and is a common point of dispute.
Divorcing spouses also need to state their income needs. Not only does this include essential expenditures, such as mortgage payments, food and utility bills, but it can also include less essential expenditures, such as meals out, entertainment and holidays.
Couples with significant wealth can have extensive schedules of income needs, including staff, private jet costs, boat costs and the funding of several properties.
If the couple cannot agree on their settlement and a judge has to adjudicate on the issue, it is likely that they will be questioned about their stated income needs and asked to justify them.
To justify income needs, a spouse will have to show the level that both parties lived at, and spent, during the marriage.
The court can be critical of spouses whose income needs are more of a wish list than a reflection of the lifestyle enjoyed during the marriage.
For example, if a couple typically enjoyed one holiday a year, and one spouse is now saying that they need more money from their spouse to fund several holidays a year, the court is unlikely to say that is reasonable.
A key thing to remember is that a person is not automatically entitled to continue the lifestyle to which they became accustomed during the marriage, but that lifestyle as a couple is relevant, and if there is sufficient capital and income, it is likely that lifestyle can be maintained.