Standish v Standish - How should matrimonial and non-matrimonial property be dealt with when applying the ‘sharing principle’ in divorce?

The facts of this case are that during their marriage, Clive Standish had transferred £77 million of his money that he acquired prior to their marriage to Anna Standish for the purpose of tax planning. His intention was that the funds would be held on trust for his children, however, when they came to divorce the funds were still in Anna’s sole name.

There was a dispute about whether these funds should be considered matrimonial property, Anna’s position was that the funds had become matrimonial as a result of Clive transferring them to her and they should therefore be shared equally.

In their unanimous ruling the Supreme Court dismissed Anna’s appeal and held that the funds should not be treated as matrimonial as the mere transfer of the funds did not amount to ‘matrimonialisation’ of the asset.

Their reasoning was based on the following legal principles:

1. When deciding whether something is matrimonial or non-matrimonial property the source of the asset is important. Property is generally considered to be non-matrimonial if it was acquired prior to the marriage or was received as a gift/inheritance to one party
2. Non-matrimonial property is not to be subject to the sharing principle
3. The starting point when applying the sharing principle to matrimonial property should be 50/50 but it should be recognised that there can be justified reasons for departing from equality.

The case is also of interest from tax planning point of view. The court made clear transferring an asset between spouses to save tax, regardless of the time involved, usually does not show that the asset is shared between them. Therefore, this type of transfer typically does not count as matrimonialisation. The transfer of assets to the appellant aimed to save tax and benefit the children by reducing IHT, not to benefit the appellant. When considering tax planning individuals will need to consider carefully their aims and take professional advice to ensure that the tax planning is carried out effectively.

Going forward, this will be considered a landmark case and will no doubt be quoted regularly by countless family lawyers. However, whilst this may set the precedent for many ‘big money cases’ that apply the sharing principle, it is not likely to impact the vast majority of divorcing couples. The reason for this is that in most cases it will be the ‘needs principle’ that is applied rather than the sharing principle. In these types of cases, the main focus is on what each party needs to rehouse themselves and any children of the family and to meet their income needs. The impact of this is that, notwithstanding this judgment, if non-matrimonial property needs to be shared between the parties in order to meet the needs of one party, this will always take precedence over any attempt to ringfence the asset due it being non-matrimonial.

The question of whether to marry or not marry will become more of an issue. Our advice to any couples that are getting married/entering into a civil partnership is to consider entering into a pre-nuptial agreement. This can set out at the outset what the parties have agreed to ringfence and what they have agreed to share in the event of divorce/dissolution and will reduce the likelihood of parties facing a dispute and having to apply to court to decide how the finances should be settled.

If you have any questions about the content of this article, please contact Gina Green on 020 8290 0440 or by gina.green@thackraywilliams.com.