The family law community has been reacting to the landmark Standish v Standish decision in which the Supreme Court dismissed the claims of a wife who contended a near-£80m transfer from her then-husband to her should be considered a matrimonial asset.
The case and decision, the detail of which is available to review here, moves to clarify the position on what assets might be considered non-matrimonial property and what could be considered matrimonial property; and how the former could be considered the latter through a process increasingly termed ‘matrimonialisation.’
“This decision brings greater clarity to financially stronger parties seeking to undertake IHT planning and helps reduce the risk of them being exposed if their marriages break down.
said Will MacFarlane, partner in the Family & Divorce team at Kingsley Napley. He described how the ‘conflict’ between IHT planning and wealth protection has now been given the ‘green light’ to for those seeking to transfer assets between spouses for IHT planning as it cannot now be assumed that those assets will be matrimonialised.
“A stand-out point from today’s judgment is that if transfers taking place within an IHT planning exercise are clearly for the benefit of the next generation or someone other than the recipient of the assets, matrimonialisation is unlikely to have occurred.”
It’s a judgement that is relevant to everyone said Caroline Holley, Partner at Farrer & Co.
“Whilst in most divorces, the division of finances will be determined by the needs of the spouses, in those cases where there is more money than is required to meet those needs, the court’s approach is to share the matrimonial assets between the spouses. However, it can be difficult to determine what is in the ‘matrimonial pot’ to be shared, which often leads to costly disputes. In today’s judgment, the Supreme Court has made clear that how the parties deal with an asset during a marriage is the key question when considering whether an asset has been matrimonialised. In essence, have they been treating the asset as shared between them?”
and, said Ros Bever, Managing Partner of Irwin Mitchell’s Private Client Group ultimately an ‘entirely sensible judgment,’ describing it as ‘a decisive outcome for those focused on wealth preservation.’
The decision is also a reminder said Peter Burgess, partner at Burgess Mee, that ‘possession is not nine tenths of the law’ bringing an end to the ‘legal limbo’ that has seen some cases deferred pending this outcome.
“Tax planners and their wealthy clients will breathe a collective sigh of relief as the Supreme Court has ruled that transferring assets to a spouse to minimise tax does not ‘matrimonialise’ them. The source of funds, rather than their legal title, is key to the court’s enquiry on divorce.
“Although the Supreme Court has provided much needed clarity on the treatment of non-matrimonial assets on divorce i.e. that they are not subject to the sharing principle, the focus was on the intention behind the transfer. Had Mr Standish made an outright gift to Mrs Standish or had the parties treated the funds as shared over time, she might be considerably wealthier today.”
Nick Gova, partner and head of family at London law firm Spector Constant & Williams, agrees saying
“This landmark ruling by the Supreme Court reinforces the principle that not all wealth transferred between spouses during marriage becomes matrimonial property. The court’s emphasis on the intention behind the transfer – in this case, tax efficiency and provision for children – is a critical distinction.”
he adds the case will have a ‘significant impact on high-net-worth divorce cases’ and going forward couples and their advisers should take the ruing into account… ‘substance and context matter just as much as legal ownership.’
The matter also raises the spectre of nuptial agreements for many who suggest such an agreement may well have negated any need for the case to have reached the Supreme Court. Amy Walpole, a family partner at HCR Law said:
“When you take your vow of “with all my worldly goods I thee endow” on your wedding day, this may not be the case if you can demonstrate assets were not intended to be shared between you and your spouse. The ruling today by the Supreme Court should provide comfort to people with assets in their sole name who do not have the intention of sharing property with their spouse and can stand the test that the “dealings” of such property has not been “matrimonialised”. Properly executed pre-nuptial agreements can further help demonstrate parties’ intentions in respect of the division of assets on divorce and help deliver a fair justice to parties involved in such cases.”
Aasha Choudhary, family law partner Shakespeare Martineau, adds the decision is a ‘ timely reminder their value.
“While it may not be the most romantic topic before a wedding… divorces can be emotionally fraught, and decisions made during a separation don’t always reflect long-term intentions. A well-drafted prenup allows both parties to set expectations early and protect their respective interests with transparency and fairness, saving the financial and emotional cost of litigation. Most crucially, this ruling makes it clear that if couples want a non-matrimonial asset to become shared property, it must be recorded clearly. Without that, the default position may now lean toward such assets remaining non-matrimonial, a major shift in the legal landscape.”
Indeed, the decision could well result in a surge in enquiries about prenuptial and postnuptial agreements said Yael Selig, a family law partner at London’s Osborne’s Law. The decision clearly outlines the importance of putting things in writing and although the court’s decision will always be grounded in making sure that the financial needs of both parties are met, the judgment ‘may offer some reassurance to wealthy individuals who fear being forced to carve up their assets if the marriage ends, a pre or post-nup remains the best possible way to protect their wealth.’
There is the question of whether the judgement went far enough said Hannah Field, Partner in the Family law team at law firm Russell-Cooke as it leaves some areas of uncertainty in her view. But it is, said Chris Lloyd-Smith, partner at Anthony Collins a ‘significant moment in the evolution of matrimonial finance law’ setting firmer boundaries between personal and shared wealth.
