This means exactly what you think it means. A complete financial settlement between divorcing couples. This is ultimately the aim of everybody as it means that all financial issues have been settled. There may, therefore, no longer be a requirement to remain in contact with your ex-spouse.
The reality is that this is often difficult to achieve. There may be children involved and other assets that are significant e.g. pensions.
A common approach to achieving a clean break settlement is to offset the value of assets against other assets. For example one party could say retain the former matrimonial home and the contents whilst the other party retains the car and pension benefits to an equivalent value. This is known as offsetting.
Pensions
These can present a problem as they can be now one of the largest assets built up within a marriage. If there are not enough non-pension assets to offset against the value of the pension then the possible options open are to either: earmark (effectively reserve part of the former spouses pension for you) or share (separate the pension into two identifiable plans and retain it in your sole name). More for on divorce and pensions visit divorceandpensions.com.
Offsetting example
Offsetting is where the value of assets e.g. pension assets are calculated and set against the value of other assets from within the marriage.
For example, a separating couple have assets as follows:
Joint assets:
Other Assets
First person - a pension cash equivalent value of £10,000.
Second person - a pension cash equivalent value of £62,000.
Find out how to work out a cash equivalent pension value?
A Possible Offsetting Solution:
First person retains:
Second person retains:
This settlement example is in simple terms but hopefully demonstrates how offsetting works.