News & Insights

If you are thinking about separating, or currently going through a divorce or dissolution of a civil partnership, you may be wondering what happens to the assets you own in your sole name or assets you acquired prior to or during the marriage you have placed in joint names with your spouse but believe to be truly owned by you alone.

A recent decision by the UK Supreme Court (UKSC), in the case of Standish v Standish has confirmed that non-matrimonial assets will not be subject to the sharing principle as of right. Non-matrimonial assets will only be encroached upon if the needs of the non-owning spouse cannot be met through the division of the matrimonial assets.  The UK Supreme Court has made it clear that pre-marital property may have become matrimonial property during the marriage. The area of law is complex, we need to consider the legal ownership of the asset, the source of acquisition of the asset but also how the asset has been treated during the marriage and the parties intention in respect of the asset. Non-Matrimonial property can therefore become matrimonialised and then subject to the sharing principle. Pre-marital wealth is assets brought into the marriage property; investments; business assets and family wealth can therefore remain non-matrimonial come the end of the marriage or indeed could potentially become matrimonialised. In respect of the family home even if this was a pre-owned property of one of the spouses the general rule is that upon becoming the family home the property is matrimonalised.

Needs or sharing?

When dividing assets, the courts look at two main considerations:

• needs – making sure each of you (and any children) are properly housed and financially secure; and
• sharing – dividing the assets built up during the marriage fairly, often in equal proportions.

Generally speaking, needs will usually trump sharing where one party (or any children of the marriage) would be left with inadequate housing or money to pay the bills if matrimonial assets were simply shared 50/50.

In terms of the non-matrimonial assets, such as premarital wealth, needs might still have to be funded from these if matrimonial assets are insufficient to do so. However, they will not be shared out just because there has been a long marriage.

What has the UK Supreme Court said in Standish v Standish?

In this particular case, the husband brought significant family wealth into the marriage which lasted 19 years. As part of inheritance tax planning, he transferred some of these assets to his wife during the marriage, with the joint intention of the husband and wife, as documented by independent financial advisers, for the investments to then be placed in trust for the parties biological children, which did not occur come the time of the marriage breakdown.

The UK Supreme Court had to decide whether this tax-planning activity and transferring of legal ownership from the husband’s name to the wife’s name had turned the assets into matrimonial assets.

In this case the Supreme Court concluded that the assets had not been mingled into family life, and they were only transferred for tax-efficiency for the benefit of the children (rather than his wife). Consequently, the Court determined that this action had not turned the husband’s non-matrimonial asset into matrimonial assets.

This landmark ruling has provided clarity around what should happen to non-matrimonial assets when it comes to sharing out assets, instead of meeting needs. The courts are focused on what is fair, and non-matrimonial wealth can be protected from a divorce, when everyone’s needs have already been met by matrimonial assets.

The case also highlights a very important point about transfer of assets between spouses for tax planning purposes, which is that such an action does not in itself make a non-matrimonial asset a matrimonial one.

Can I rely on the recent UKSC decision to protect my non-matrimonial wealth?

The recent court ruling is very clear and sets a firm precedent about ringfencing non-matrimonial assets on divorce. However, the law is always changing, and each case will turn upon its own facts.

If you are concerned about protecting non-matrimonial here is a list of steps you can consider and discuss with your solicitor:

• enter into a prenuptial or postnuptial agreement, and this will set out that your premarital assets are not to be shared on any future divorce;
• keep premarital wealth completely separate to marital life, and do not mingle premarital assets with marital property, investments and expenses; and
• as well as family law advice, seek tax planning advice to ensure that steps taken for tax-efficiency will not turn your premarital assets into matrimonial assets.
• Ensure that you do not treat the non-matrimonial asset as a matrimonial asset for the benefit of the whole family.

How we can help

Whether you’re planning for the future, or navigating a divorce now, our experienced family law team are here to help.

For further information, please contact one of our Family Law experts today.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.