Why your divorce needs a Clean Break Order. Your assets could still be at risk.

A Clean Break Order is a legally binding financial document that effectively ends your financial commitment to your spouse after divorce. This will prevent any future financial claims that your spouse may have over your assets.

Many people think that divorce proceedings alone will separate your finances permanently but this is not the case. The Final Divorce Order (previously known as decree absolute)for the divorce will not stop your former spouse potentially making claims against your future earnings or assets gained.

The Clean Break Order means that both parties agree to go their separate ways permanently and to end all financial obligations to each other. They will not be able to claim against you and you will not be able to claim against them.

Why you and your spouse might need a Clean Break Agreement.

If you are divorcing or dissolving a civil partnership and you want to save money you might look for areas that you consider to be less important at the time to skip. A lot of people look at Clean Breaks as being an area that they do not necessarily need as it may not be relevant to their current situation. You should understand the risks that you could be taking before doing this.

The situation that the Clean Break Order guards against, is if your finances improve at some point in the future through maybe getting a work promotion or gaining new assets like an inheritance, then your former partner will not have any claim over it if they decide to pursue it.

Frequently in divorces the actual process can be relatively amicable if there are no major assets to be taken into consideration. Things can change when one of the former partners comes into some money and your former partner’s understanding attitude might evaporate.

You have to consider the potential that your finances could improve drastically at some point in the future. Bear in mind that this includes:

• Savings
• Inheritance
• Properties
• Pensions
• Greater earnings from promotion
• Owned business becoming successful
• Lottery or competition wins

Would it be inconceivable that you might earn more money from any of these?

A Clean Break Order would give you the peace of mind that your future earnings are safe though a court approved financial agreement to guard against future claims.

Even if you and your partner have few assets at the time of divorce you should still consider a Clean Break agreement.

A number of high profile cases can show what can happen if you do not obtain a Clean Break Order.

The Page Divorce

The most famous of these is the case of Nigel Page. When Nigel got divorced he was in no way wealthy, this was until he won £56 million in the Euro Lottery in 2010. At this point he had been divorced for 10 years.

It is thought that Nigel had offered his ex-spouse, Wendy Page, around £1 million after his win. This is despite her leaving him for another man.

However Wendy successfully sued for a lot more and they settled out of court for a payment of £2 million.

The Vance Divorce

Another example is Dale and Kathleen Vance. They divorced in 1992 and again neither had any sizable financial assets at the time.

Years later Dale Vance’s own Green Energy business was estimated to be worth £57 million. This was a company that Dale had founded.

Since Kathleen had not remarried since the divorce she successfully claimed a financial settlement against Dale’s new earnings despite them having been divorced for 20 years.

Neither of these cases would have come to anything if the divorcing couple had a Clean Break Order.

These cases are considered unusual and extreme however you always have to consider the possibility that your income can increase at some point in the future.

The Clean Break Divorce Process

• Couples that are past the Conditional Order (previously known as decree nisi) stage of their divorce process or civil partnership dissolution can apply.
• The order will need to be approved by a judge.
• You must set out your financial arrangements and state that there is to be a Clean Break.
• The process should take between 2 or 3 weeks.
• Both parties will need to agree to the Clean Break and it will be difficult to obtain one without a good relationship with each other.
• There are a number of different options available in the agreement on the division of assets. This could include dividing up pensions with offsetting or sharing, for example.
• Clean Break Orders must be drafted by a qualified divorce solicitor.
• Until the financial agreement has been approved by the court then either party could ask the court to make additional financial provision for them if there are any changes in circumstances.

What can affect whether you can get a Clean Break Agreement from the court?

The judge will rule on the Clean Break by deciding whether it would be fair to both parties. They assess the submitted financial information on an individual case basis. It will help if you can show that you have taken some legal advice on the matter.

It is also important that you do not have any ongoing assets to split.

Ongoing Spousal Maintenance

You will struggle to get a Clean Break Order if you already have a Maintenance Order for your spouse or if you have any ongoing financial obligations to each other.

Potentially the court can order fixed term financial payments whereby after a set date the Clean Break will be in effect and you will be guarded against future claims. This effectively means deferring the Clean Break.

If there is a Maintenance Order in place then the agreement can be changed if one of their parties has a significant change in their income.

Spousal maintenance will also stop if your ex -partner dies or remarries.

In this case it is recommended to obtain a Consent Order instead. Read more about the circumstances that will require a consent order rather than a clean break here.

Lump Sums

Rather than a deferred Clean Break you could consider paying a lump sum rather than a constant maintenance claim.

This can take into account  how much money can be gained from investing the lump sum and receiving an income from that.

The lump sum payment can potentially be spread into instalments if the situation called for it such as one of the payments being after a house or other asset has been sold.

If the spousal maintenance is paid in a lump sum then a Clean Break Order is possible.

Child Maintenance

There cannot be a Clean Break if there are any children under the age of 21 or still in full time study.

However, couples could agree to a Nominal Spousal Maintenance Agreement. This is an order for £1 per year with the provision  that the amount will increase if either party’s financial position improves dramatically.

You cannot get a Clean Break Order when there is a Nominal Maintenance Order in place.

Marriage Length and Assets

The length of the marriage is taken into consideration for the purposes of a Clean Break Order. The court may view a marriage of under 5 years as being considered short. Whether the couple lived together before marriage will be taken into consideration.

The issue that the court is trying to address is how financially entangled the couple is. The judge may want ongoing payments to ensure that a fair division of the held assets is reached.

The judge might allow couples exiting short marriages to simply leave with the assets that they came into it with, which is the simplest option. To do this both parties would provide financial records of the assets they owned when they were married.

If the marriage is short then there might not be any spousal support paid at all or paid  for a short period through what is called a ‘term order’.

Longer marriages make obtaining a Clean Break far more difficult to achieve. In these cases having a solicitor drafted consent order will explain how you intend to divide your assets to the court.

Can a Clean Break Order be overturned?

A Clean Break Order is legally binding in almost all circumstances although there is the potential for the court to overturn it.

If there is an intervening event within 12 months of the Clean Break Order being in place then a different order may be issued. In effect this is an event which changes things so drastically that the court would have ruled differently had that been the case at the time. Major changes to financial circumstances will not count as an intervening event although your ex-spouse committing suicide would.

Fraud would also invalidate the agreement. Usually as a result of fraudulent non-disclosure of assets.

In a financial settlement each party is under an obligation to make full and frank financial disclosure of their income and assets.

A famous case of this would be the Sharland divorce. The husband failed to disclose during the hearing that his software company was preparing to offer shares to the public and had been valued far higher than the valuation that he had offered to the court. The wife’s appeal was upheld by the court.