Divorce can be a daunting process, especially when it comes to dividing finances. The recent high-profile case of Standish v Standish has brought guidance on how key concepts should be applied. It highlights why legal advice is crucial for those bringing wealth and assets into a marriage.
What is matrimonialisation of assets?
When a couple’s assets are divided on divorce, the court considers whether any assets have been “matrimonialised”. But what does this mean and why is it important?
The court looks as the couple’s financial assets and has to work out whether they are “matrimonial” or “non-matrimonial”.
If an asset is matrimonial it means it has been built up or acquired during a marriage. Both spouses on divorce usually have a strong claim to share equally in all matrimonial property. Typically, matrimonial assets include the family home, pensions and savings.
If an asset is non-matrimonial it means that is has been brought into the marriage by one spouse only. For example, this could be wealth built up before the couple even met, it could be an inheritance or a bonus received after a couple have separated. Non-matrimonial is less likely to be shared equally and it is even possible to “ring-fence” or protect non-matrimonial assets for the benefit of the spouse who brought the asset into the marriage. Typically non-matrimonial assets include inheritances, family businesses and property that was bought before marriage or after separation.
In certain circumstances, non-matrimonial property can change into matrimonial property because of how the property has been dealt with during the marriage. This is called “matrimonialisation”. A common example is where an inheritance received by one spouse is used to buy a family home or second home for the family to use and enjoy.
Why does this matter to me?
Classifying assets as matrimonial or non-matrimonial is crucial during a divorce, as it determines how the finances will be divided. This division is then formalised in a financial settlement which must be fair and reasonable to both spouses. However, there may be disagreements over which assets should be included in the settlement. For instance, one spouse may argue that an inheritance received before the marriage should not be included. Understanding the difference between matrimonial and non-matrimonial assets can help you navigate this process.
Matrimonial assets will be shared between spouses, often 50:50. This is called the sharing principle.
Non-matrimonial assets are a little more complicated. Often you can ask for them to be excluded from the financial settlement altogether.
However, this is a starting point and not a fixed rule. The court will not always apply the sharing principle, and will consider each case on its facts. Matrimonial assets may be divided unequally in circumstances where there a couple does not have sufficient assets to meet their needs. The couple and their children’s needs are always prioritised above dividing assets 50:50. And non-matrimonial property may need to be included in the division of assets again where there are not enough assets to meet each spouse’s needs.
Background to the Standish v Standish case
The Standish v Standish [2024] case has been making waves. Picture this: a glamorous couple, a sprawling estate, and a fortune worth millions. When the Standishes decided to part ways, it wasn’t just about who got the mansion or the yacht - it was about redefining what counts as matrimonial property.
Mr and Mrs Standish married in 2005 and had two children together. Mr Standish brought significant wealth into the marriage, which he had acquired during his successful career in financial services. At the time their case came before the court, the family’s total wealth stood at £132million.
What was at the heart of the drama? £77million worth of assets transferred from Mr Standish to Mrs Standish for tax planning reasons in 2017. Much of Mr Standish’s wealth had been built up before the couple had met or married. However, Mrs Standish argued that by transferring £77million into her sole name, those assets had become “matrimonialised” i.e had changed from non-matrimonial to matrimonial and were now capable of being divided 50:50. This meant, she said, that of the £132million, £112million was capable of being divided 50:50. The judge first dealing with the case agreed with her. However, the judge used his discretion not to split the £77million equally but instead gave 40% to the wife. In total, Mrs Standish received £45million.
Both Mr and Mrs Standish appealed and the case ended up in the Court of Appeal.
The Court of Appeal decision
The Court of Appeal allowed Mr Standish’s appeal against the earlier decision, emphasising that matrimonialisation should in fact have been applied more narrowly in this case. The Court of Appeal found that the sharing principle had caused the wealth to be unfairly divided in Mrs Standish’s favour. It remains a key consideration how an asset has come into a family (the source) rather than just whose name it is in.
The Court of Appeal found that 40% of the transferred assets should not have been awarded to Mrs Standish. Instead, there should have been an assessment of how many of the transferred assets were built up during the marriage and the sharing principle should have been applied to those assets only.
The amount Mrs Standish received was reduced from £45 million to £25 million. It is believed that this level of reduction is unprecedented.
Future implications
The Standish v Standish case is an important authority on how courts will treat assets built up before marriage.
The fact that Mr Standish had transferred assets into Mrs Standish’s sole name did not mean they were matrimonial property. The source of funds is a crucial factor that will determine how assets are shared, over and above the title to the assets. For those negotiating a financial settlement, Standish is a reminder that it’s crucial to understand which of your assets are considered matrimonial and which are not. Assets acquired before marriage or through inheritance might not be split equally. The court’s decision in Standish also shows that fairness is more important than a strict 50:50 split. The needs and contributions of both parties will be taken into account.
For couples entering into a marriage with significant pre-marital wealth, a prenup is an effective way to protect that wealth should the worst happen. Prenups are becoming a much more common seen as a practical step, much in the same way as insurance. Properly prepared prenups can help avoid complicated legal disputes and costly legal proceedings.
Our family lawyers are experienced both in dealing with wealth protection and in dealing with arguments around matrimonial and non-matrimonial assets. If you would like any advice on financial arrangements on divorce, please contact us.
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