SUMMARY
In Standish v Standish [2025] UKSC 26, the Supreme Court has unanimously upheld the decision from the Court of Appeal that the transfer of pre-marital assets for the purpose of inheritance tax planning did not matrimonialise those assets and that the sharing principle should not apply.
The key takeaways from the judgment are:
· Non matrimonial assets are definitively off the table for the purposes of the sharing principle.
· When determining matrimonial property, it is the source not the title of the asset that is important.
· Pre-marital assets can be matrimonialised where the spouses have been treating those assets as shared over time.
· Transferring assets to one’s spouse for the purposes of tax/business planning is not determinative of those assets being treated as shared.
BACKGROUND FACTS
Standish v Standish focuses on the transfer of c.£80m of assets from Husband to Wife in 2017. This transfer was part of a tax planning exercise to take advantage of Wife’s non-dom status in the UK. The intention was for her to establish offshore trusts for the benefit of their children with those assets.
These assets derived from the Husband’s pre-martial wealth, generated throughout his successful career in the financial services industry from which he retired in 2007, having married in 2005.
CASE LAW
There are three principles established by case law which are applicable to financial remedy proceedings; the Needs Principle, the Compensation Principle and the Sharing Principle.
The Needs and Compensation principles were not addressed in this judgment, however we mention for completeness as non-matrimonial assets may still be awarded under these principles. The Needs Principle looks at the financial needs of each party in the foreseeable future and the Compensation Principle looks at “relationship-generated disadvantage”, such as giving up a career to bring up children.
The Sharing Principle was established in White v White [2001] 1 AC 596, a landmark case which changed the landscape of settlements under divorce. It levelled the playing field between the “bread-maker” and the “home-maker”, treating both parties as equally entitled to wealth generated throughout the marriage.
In Miller v Miller; McFarlane v McFarlane [2006] UKHL24, the court held that only matrimonial property should be subject to the sharing principle. Matrimonial property is a term applied typically to assets that are earned or gained during the course of the marriage. Conversely, non-matrimonial property typically applies to assets which were held prior to the marriage or acquired by way of gift/inheritance.
The concept of matrimonialisation was coined by Roberts J in WX v HX [2021] EWHC 24, to describe the circumstance whereby non-matrimonial assets become matrimonial assets. While this had been explored previously, in K v L [2011] EWCA Civ 550, Wilson LJ sought to lay guidelines as to the situations where this may occur as follows:
1. Where the relevant assets cease to be of significant value in relation to matrimonial property.
2. Where the relevant assets are mixed in with matrimonial property and it is accepted that the contributing spouse would view those assets as matrimonial property.
3. Where the contributing spouse has chosen to invest the assets in the matrimonial home.
The Supreme Court looked to these historic cases in its judgment.
THE JUDGMENT
The essential question considered in the Supreme Court was whether the 2017 assets were matrimonial property and so subject to the Sharing Principle. The Supreme Court took the opportunity, to the delight of private client practitioners, to explicitly confirm what was already widely understood that the Sharing Principle should only apply to matrimonial assets. The judgment reads; ‘the time has come to make clear that non-matrimonial property should not be subject to the sharing principle’.
The Supreme Court upheld the Court of Appeal’s assessment that 25% of the £80m comprised matrimonial property however disagreed with the basis on which it had not been matrimonialised. The Court of Appeal had looked to the list provided in K v L and on the basis that none of the scenarios described were applicable here the Court ruled that the assets had not become matrimonial property. The Supreme Court stated that the list was not intended to be exclusive and provided a broader explanation of the term: ‘what is important (….) is to consider how the parties have been dealing with the asset and whether this shows that, over time, they have been treating the asset as
shared between them. That is, matrimonialisation rests on the parties, over time, treating the asset as shared.’
The Wife contended that by virtue of the 2017 transfer, the assets had been shared between her and her husband however the Supreme Court ruled that the intention was clearly to save tax and that a benefit to the family is not synonymous with a shared benefit between the spouses. Whoever has the title to property is not determinative in the matrimonial character of that property.
