If a divorcing couple can reach an agreement on how to divide their assets and liabilities, a clean break financial order provides financial certainty for the future by restricting both parties from making further financial claims against the other.
A clean break order severs all financial ties regarding both assets and liabilities and provides financial independence moving forward. The parties will have the security of knowing that future assets, such as inheritances, increased pension capital, income related benefits, or indeed any unexpected windfall that one or other of the couple may be fortunate enough to gain are protected. If the terms are agreed between the parties, there is usually no need for any court attendances, and the judge can consider the documents without the need for the couple to be present.
Why a Financial Agreement Should Be Formalised
Extreme caution should be exercised when a couple reach a financial agreement between themselves, but do not formalise it in a clean break order, sealed by the court, as there is a risk of future claims from either party against the other in the future, whereby assets that have been built up post separation/divorce could be at great risk.
Pensions and the Division of Assets in Divorce
It is often the case that separating couples do not realise the significance of pension capital that each party may have, or that the court can make an order for this to be shared by the person who has accrued a larger amount. Even when parties are aware of this, it needs to be understood that a simple equalisation of pension capital may not result in a fair division of assets in divorce, with one or other of the parties having significantly less income from their private pension when they reach retirement age. Specialist divorce financial advice on this is paramount and with pension capital in excess of £100,000, a pension on divorce expert report is strongly recommended.
When Can a Clean Break Financial Order Be Sent to the Court?
A financial consent order cannot be sent to the court until the conditional divorce order has been granted. This can be applied for 20 weeks after the court has issued the divorce application. However, this does not mean that parties should wait until those 20 weeks have expired before considering how they might wish to sever their divorce finances.
The 20 week period should be used in obtaining up to date financial information, which will identify the relevant divorce assets or liabilities and their values. Once this has been exchanged, discussion and negotiations should be focused on how best to meet the housing and income needs of each party from the available assets, with any children of the family and where they might live being prioritised.
What If You Cannot Agree on a Divorce Settlement?
All is not lost if a couple are unable to agree on the division of the matrimonial assets. There are mediators or arbitrators who can help couples to reach a divorce settlement. Solicitors can advise on the law and the legal rights of each party and aid in negotiations.
A clean break order is intended to provide finality. It can have long-term, negative financial consequences if not drafted properly and legal advice should always be sought before reaching a final financial settlement.
What Information Does the Court Need?
A statement of information will also need to be drafted and sent to the court with the order, detailing any assets and liabilities each party currently has and what they will have after the proposed terms of any order have been implemented. From this, the judge is able to consider whether the proposed terms are fair to both parties and particularly to any children of the family.
Does a Clean Break Financial Order Affect Child Maintenance?
Finally, it should be noted that a clean break order does not prohibit child maintenance claims, or variations, as the non-resident parent has an ongoing responsibility, which means that payments can be varied if there are changes in income and frequency of contact with the child.
Written by Stephanie Allen, Cilex Lawyer, Lyons Bowe Family Law Department
