The legal world has been waiting with bated breath for the Supreme Court to hand down its Judgment in Standish v Standish.
The case offers conclusive guidance on how the family court will differentiate between marital and non-marital property, and when that property might be muddled, or as is now fashionable to say “matrimonialised” i.e. coming into the marital pot. Where the needs of the parties allow, marital property is often shared 50/50.
In brief summary, the case centred around Mr Standish who acquired substantial assets through a career in financial services. He divorced and re-married. Nothing new there. Mr Standish retained substantial wealth in his sole name until he transferred a vast sum to Mrs Standish in 2017 in what he claimed was a tax saving exercise for the benefit of the children.
Mrs Standish claimed that those funds (just shy of £80 million), had been matrimonialised (there’s that word again) as having been transferred into her sole name and therefore formed the marital property and available for sharing. The Court of Appeal disagreed and stating that it was the source of the wealth that was important, not the title of the person who owns it.
The Supreme Court agreed and we now have clear guidance as follows:
- The sharing principle applies only to matrimonial property. There is no automatic right to share non-marital property however the court can use this to meet needs i.e. the other person needs some of those assets to re-house or provide an income
- Transferring assets into a spouse’s name does not automatically convert them into matrimonial property.
- The intent and treatment of the assets over time are key. The Court emphasized that the 2017 transfer, made solely for tax purposes, did not reflect an intention to share the assets as part of the marital partnership.
Not so great for Mrs Standish however it is worth noting that this was even described by the Supreme Court as a “big money case”, and she still walked away with £25 million.
Whilst this provides crucial guidance in this area of law, there are a few considerations:
- The average divorce won’t be in the millions, and there is concern that clients and lawyers alike will use Standish to ring-fence non-marital assets, even in those modest and small sized cases.
- Spouses and civil partners are exempt from paying Inheritance Tax on transfers made to each other, and so this is a key role of Estate planning. Clients can make assessments of their health and age, with a view to apportioning their assets between them. Often, clients then start to make transfers down to their intended beneficiaries (such as children) and hope those making the transfer survives 7 years, after which the transferred asset should fall outside of the Estate and therefore outside of the Inheritance Tax calculations. With increasing levels of Inheritance Tax changes being announced, we are already finding our clients are looking to their lawyers and other advisors to guide them through this process.
- It is going to be vital to ensure any tax planning strategies are effectively achieved, whilst also ensuring the intentions of the parties remain transparent to avoid ambiguity if the marriage breaks down or one spouse or civil partner dies (leaving the survivor with ultimate control of the destiny of the assets).
It is vital for our clients to get this right. We offer wide ranging services in the Private Client Team providing a cohesive approach to share our expertise with our clients, to ensure successful planning strategies are achieved. It is always best to take a holistic approach with Estate Planning, and review Wills, nuptial agreements, and any other legal documents as part of this process.
For more information on marital/non-marital assets and asset protection generally, please contact Nockolds on 0345 646 0406 or email enquiries@nockolds.co.uk.