When people get divorced and receive their decree absolute (final order) it legally ends the marriage but does not end their financial commitments towards each other. A clean break order is needed to allow the finances of both spouses to be completely severed. If a clean break order is not obtained, your ex-spouse could potentially make a financial claim against you at any time in the future. If your financial circumstances allow, a clean break lets you become financially independent from your former partner.
What does a clean break order cover?
A clean break order considers the income and assets both individually and shared and aims to balance each of your interests. The longer the marriage, the more likely the poorer spouse may receive a substantial share of the matrimonial assets. This is particularly true in cases where they looked after the house and any children.
Additionally, you will also need to agree on how each asset is shared. For instance, one of you may wish to remain in the family home with the children, which may mean the other receives a greater share of the other available assets as a balance.
As part of the negotiations around a clean break order, consideration will need to be given to any debts, such as the remaining balance on the mortgage, credit cards, or loans. How will these be paid?
Any agreement that is made should contain a clause stating that neither of you will be able to make any further financial claim against the other, including making a claim against the other’s estate if they die.
The benefits of a clean break order
Arguably, getting a clean break is a better solution than agreeing to continue paying spousal maintenance for years. As part of the balancing of assets, you might agree that your spouse receives a larger share of the marital home or keeps a greater portion of your pension in exchange for not paying spousal maintenance. Many divorcing couples find becoming financially independent emotionally liberating, and both parties are likely to agree a clean break will help to reduce future conflict and uncertainty surrounding payment and receipt of spousal maintenance.
What is the purpose of a clean break order?
There are several legal cases highlighting the importance of getting a clean break order. One notable example is the case of Nigel Page, who won £56 million in the Euro Millions Lottery ten years after he had divorced. At the time of his divorce, the parties had modest assets and did not get a clean break order. This left the door open for his ex-wife to bring a claim later who negotiated a settlement of £2 million.
While the chances seem miniscule, and you may question the likelihood of winning the lottery jackpot or building a hugely successful business, it is important to know it remains possible. Even if neither of these things happens, you may still be at risk of losing your future pension provision, future earnings, or inheritance. At the time of his divorce, Nigel could not have anticipated how costly not getting a clean break order would be.
Will dispute resolution help negotiate the terms of a clean break order?
Dispute resolution can be an invaluable tool in negotiating the terms of a clean break order and resolving any disagreements that arise. While the purpose of a clean break order is to provide finality and sever financial ties between separating parties, circumstances may change, leading to disputes over the interpretation or enforcement of the order.
When disagreements occur, mediation or collaborative law processes can offer a less adversarial and often quicker resolution than court proceedings. Through mediation, both parties can work with a neutral third-party mediator to come to an agreement about the terms of the clean break, such as how assets are divided or how debts are managed. This approach allows for flexibility and can help preserve the relationship between the parties, which is particularly important if they have children or share other ongoing responsibilities.
If disputes continue or a more formal resolution is needed, arbitration is another option where a neutral arbitrator makes binding decisions on the matter. This provides a quicker alternative to court while ensuring a final decision.
Dispute resolution can also be useful after a clean break order has been made if one party believes the terms of the order are being breached or if changes in circumstances necessitate modifications to the order. Ultimately, dispute resolution provides a constructive and flexible approach to addressing disagreements related to clean break orders, ensuring that the settlement remains fair and effective.
What is the impact of future circumstances on a clean break order?
As stated earlier, clean break orders are designed to provide financial closure between separating parties by ensuring that both individuals can move on without future claims on each other’s assets. However, future life changes, such as inheritance can complicate this arrangement.
A clean break order typically freezes financial arrangements at the time of the divorce. If one party inherits a significant amount of money post-divorce, the other party generally has no claim on it, as the order was intended to address the financial situation at the time of settlement. However, if the inheritance affects the overall financial fairness or wellbeing of one party, courts may revisit the order in some exceptional cases.
How does a clean break order work?
For clean break orders to be made, the court must be satisfied that each party entered the agreement in full knowledge of the other’s financial position. This requires both parties to provide full and frank disclosure of their liabilities and assets.
This is usually obtained by both parties completing a Financial Statement, better known as Form E, which is a comprehensive document containing information about income, debts, liabilities, assets such as any property you own including the former marital home, jewellery, shares, vehicles, and pension details.
Finally, once an agreement has been reached, a consent order will be drawn up reflecting the agreement made and include the clean break clause. You can agree the contents of the consent order between yourselves, via negotiation using family solicitors or mediation.
Both parties sign the agreement together with another document called the Statement of Information. It contains things such as your capital assets, and income, details of where you are living, and whether you have future plans to remarry or cohabit with someone else. Both documents are then sent to the court and help the judge decide whether the agreement reached between you is fair.
It generally takes around 2 to 3 weeks to draft a Consent Order, get it signed and sent to court, but a lot longer to collate all the information required to complete the Form E, and negotiate an agreement.
The procedure to obtain the Consent Order is straightforward and usually involves neither party having to attend court. That said, the court will not simply rubber stamp the order as the judge may disagree with it. They are making a legal order, so they need to be absolutely certain the arrangements are fair, considering all the circumstances of the case. Ideally, they will want to see that you have taken legal advice as to the implications of the order and fully understand the contents. The court will not tell you what to do if they do not agree with the order. They will probably require you to discuss an area of the consent order that concerns them.
It is important to note that the consent order cannot be filed with the court until after the Decree Nisi (interim order) has been pronounced.
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Does my ex-partner have to agree to a clean break order?
In cases of amicable separation, the two parties can discuss their finances and come to a mutually beneficial agreement. However, agreeing on how to divide the matrimonial assets when divorcing can lead to more conflict than any other part of the process.
If your ex-spouse refuses to sign a clean break order or agree on the financial settlement, you may need to go to court and ask them to decide the matter for you. Solicitors call this process ancillary relief.
Clean break orders are quicker and cheaper than having to go through ancillary relief, but it will very much depend on how cooperative your ex-partner is. It is sensible to try and exhaust every option, including mediation, before applying for ancillary relief.
Things that affect a clean break order
- The length of the marriage. It is more likely a court will make a clean break order if the marriage was short
- Ongoing spousal maintenance (although spousal maintenance can be capitalised, which means one party receives a lump sum instead of ongoing maintenance). Pensions can also be offset against similar assets.
- Failure to adequately provide financial disclosure by one, either, or both parties
- Fraud, or another intervening event
What are the international considerations of a clean break order?
When a party to a clean break order relocates internationally, enforcing the terms of the order can become challenging. While a clean break order in one country provides financial finality, enforcing it abroad requires cross-border cooperation between legal systems.
Countries differ in their recognition and enforcement of foreign financial orders. For example, the Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance facilitates enforcement of certain orders, but clean break settlements may not always be covered. The process of obtaining recognition of a clean break order abroad can be complex, involving lengthy court procedures and potential resistance from local courts unfamiliar with the foreign order.
Furthermore, currency conversion and differing tax regulations may complicate enforcement, particularly if the former spouse has significant assets or income in a different jurisdiction.
While a clean break order aims to provide financial independence, international relocation of a party introduces complications in its enforcement, necessitating legal support and international cooperation to ensure the order is honoured across borders.
How is debt allocated in a clean break order?
When a couple divorces or separates, any existing debts must be addressed alongside the division of property and assets. Debt allocation is determined based on the total financial picture, which includes any liabilities accrued during the marriage. This can include mortgage debt, loans, credit card balances, or other financial obligations. The court will consider factors like each party’s income, financial contributions, and needs before deciding who is responsible for paying what. In many cases, debts are divided in proportion to each party’s financial capacity or their involvement in acquiring the debt.
If one party is assigned specific debts, the clean break order may require them to take on full responsibility for those obligations. However, the challenging aspect arises if one party fails to pay their share or if a joint debt exists that continues to affect both parties’ financial well-being. The clean break order, once made, typically prevents further claims; therefore, it may not be easy to revisit the debt allocation if one person defaults.
It is important for both parties to understand the long-term implications of debt division, as failing to address all liabilities fully during the divorce could lead to complications in the future. While a clean break offers financial independence post-divorce, the resolution of any debts must be clear and fair to prevent ongoing disputes.
How will a judge decide if I can have a clean break order?
Under family law, the court will weigh up whether the terms of the consent order are fair to both parties. They will assess all the financial information they have been given and consider the situation on a case-by-case basis and must be satisfied that each person entered the agreement with full knowledge of their ex-spouse’s financial circumstances.
When the court considers a financial agreement, it takes into account the following factors:
- Property, income, earning capacity, and any other financial resources which either party has or is likely to have in the future. This includes consideration of any potential increases in earning capacity.
- Each party’s financial needs, obligations and responsibilities both in the present and the foreseeable future
- The standard of living maintained by the family prior to the breakdown of the relationship
- The age of both parties and the duration of the marriage
- The physical and mental disability of either party
- Contributions made by each of the parties during the marriage and in the foreseeable future. This includes taking care of any children and looking after the home.
- Conduct of the parties (if the court believes it would be inequitable to disregard the conduct). It is rare for the court to take conduct into consideration.
- The value of any benefit either party would lose by ending the marriage
The court must also have particular regard to:
- The financial needs of any children
- The income and earning capacity and other financial resources of any children
- Mental disability or physical impairment of any children
- How any children were being educated or trained
Does a clean break order affect child maintenance and spousal maintenance?
A clean break order will not prevent you or your ex-partner, whoever is the primary carer of the children, from claiming child maintenance. This is because it is not possible to dismiss claims of child maintenance through the courts. The primary carer of any children will still be able to apply for child maintenance via the Child Maintenance Service (CMS).
Although child maintenance can be included in a consent order, it will only be legally binding for a period of 12 months. After this time, the CMS has jurisdiction to enforce child maintenance, including calculating the amount due if you cannot reach an agreement with your ex-partner.
You cannot generally get a clean break order if you plan to agree to ongoing spousal maintenance. An agreement to pay ongoing spousal maintenance means that either party can request the amount paid is increased or decreased as situations change. Sometimes, it may be appropriate to pay spousal maintenance as a lump sum upfront or off-set against a capital asset, such as the former matrimonial home. If this can be done, a clean break can be achieved. Spousal maintenance is usually for a set time, although it can last for the rest of both parties’ lives if they are older when they get divorced or have substantial assets. It ends automatically if the receiving party marries or dies.
Some couples who divorce agree on “nominal spousal maintenance”. This is where an order is made for payment of £1 per year (this is not actually paid in practice), which allows the amount of maintenance to be increased if the paying party’s financial circumstances change. It is not possible to get a clean break order with a nominal maintenance agreement.
Are there any tax implications when getting a clean break order?
When obtaining a clean break order, there are important tax implications that need to be considered. The division of assets can trigger capital gains tax (CGT) if assets like property or investments are sold or transferred. However, in many cases, transfers made as part of the divorce settlement are exempt from CGT. It is important to structure asset division carefully to minimise this tax.
Another consideration is the potential impact on income tax. Spousal maintenance payments, for example, may be taxable to the recipient, but this can be mitigated by adjusting the terms of the settlement.
To minimise tax burdens, parties may explore options such as using tax-free allowances or timing asset transfers to take advantage of lower tax rates. Seeking advice from a tax professional or financial planner is often essential to ensure that the clean break settlement is optimised from a tax perspective.
Advantages of a clean break order
The main advantages of obtaining a clean break order are:
- It prevents future claims
- Both parties can move on and it may, therefore, be easier to deal with the end of your relationship
- Minimises conflict when dividing assets, including the marital home
- Prevents the expense of defending any future claims
A clean break order will make sure that all your financial ties are cut, and neither person can make a future financial claim against the other. This also applies if one of you were to die because, with a clean break order, it is not possible to make a claim against their estate.
The financial cost of not getting a clean break order can be significant; remember the plight of Nigel Page mentioned above. Assets and income gained after the marriage has ended could remain subject to a claim.
Can a clean break order be enforced?
If your ex-spouse fails to carry out what has been agreed within the consent order, the courts have powers to ensure the law is adhered to. Before resorting to court action, you should give them an opportunity to correct the situation because they may have a good reason; perhaps they have been made redundant, for example.
To enforce an order, you must complete an application notice (D11 form). It is recommended you seek legal advice before attempting to enforce a clean break order.
How much does a clean break order cost?
The court fees for filing a consent order are currently set in the region of £50. Solicitors charge for negotiating the agreement, collating the information for the Form E (if they have been involved in this), drafting the consent order and Statement of Information form. Charges vary between solicitors, their level of experience, complexity of assets, and between areas. Therefore, it is extremely difficult to provide an estimate of such costs. Solicitors are more than happy to provide costs estimates, and many have guidance on their websites.
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