Clean Break Settlement

Clean break settlements are used by a divorcing couple wishing to have a fresh start after the divorce is finalised without being financially tied to the other party. It is a type of financial order that the courts can make and once implemented means that there are no financial commitments owed from one party to the other (other than child maintenance if relevant). 

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How does a clean break settlement work and who can get one?

A clean break settlement will effectively end the financial relationship between a couple following a divorce. The parties will no longer have any financial claim over their ex-spouse, including in relation to future pensions. Without such an agreement, either party can potentially make a claim at any time in the future. 
The length of marriage can determine whether or not it is appropriate. A shorter marriage (under five years) will generally be easier for a clean break, as it is more likely that both parties will have jobs and their capital can be more easily separated. In contrast, it may be harder with a longer marriage, since it is more likely that one party may have stopped working to look after the home and/or raise a family. In these cases, spousal maintenance may be appropriate, making it unlikely that a clean break would be granted by the courts. 

What are the advantages and disadvantages?

A clean break settlement is not suitable for all divorces and so each couple needs to decide if it is appropriate in their circumstances. 

Advantages

In the right circumstances, there are a lot of advantages to a clean break, including:

• Allowing both parties to move on without financial ties to the past relationship, which can make the process of dealing with the divorce a lot easier.
• Helping reduce tensions and conflicts around the division of assets.
• Protecting parties from future claims, including the expenses that would arise as a result of this. This gives the parties peace of mind.
• Relationships change after a divorce and even an amicable one can become strained in time. A clean break ensures that a change in this relationship does not affect what was agreed when things were more harmonious.
• A clean break settlement does not get affected by unforeseen changes, such as job loss or an unexpected death.

Are there any disadvantages?

A clean break settlement will not be granted in situations where it is not appropriate or where the parties do not agree. So generally speaking there are few disadvantages to such a settlement. However, it is worth bearing in mind that it is a court order that needs to be followed and if circumstances change (or do not change) in the future, then one party can potentially be negatively impacted. Unless there are very compelling reasons (such as mistake or non-disclosure), then such an agreement will not be overturned. Promotions, inheritance, and change in the value of a family home, are all factors that will be considered when making the order, but no one knows what the future holds- a lottery win, for example, is completely unexpected (and granted unlikely!) but cannot be planned for. It is also worth noting that spousal maintenance ends once the party receiving it remarries. If this is soon after the divorce, it is likely that the party paying would have paid less this way then a clean break agreement. However, there is no certainty in life and if the other party does not remarry, the maintenance will continue.

How to get a Clean Break Settlement

To obtain a clean break settlement, the parties need to file a draft consent order with the court containing the terms of the financial settlement, with details of their current finances. If the court accepts the order, it is approved and becomes legally binding once the divorce is finalised. The court needs to be satisfied that both parties are entering into the agreement with full knowledge of the other party’s financial situation following full and frank disclosure. The cost of the settlement is the legal fees to draft the order plus a court fee.

Both parties have to agree to the clean break settlement, and so it is unlikely that it will be possible to use in situations where there is a high degree of disagreement or the relationship has completely broken down. 

In determining spousal maintenance for a clean break settlement, the courts generally use the Duxbury calculations to work out an appropriate lump sum to be paid in lieu of spousal maintenance. 

What about child maintenance?

A clean break settlement only applies to the financial situation of the two parties. It does not stop a parent’s legal obligations to pay child maintenance and this cannot be overridden by a clean break settlement. Child maintenance applies until the children reach 21 years or end full time education. Regular child maintenance can either be agreed as part of the financial settlement agreement, otherwise the Child Maintenance Service will become involved.