Standish v Standish [2025] UKSC 26 (02 July 2025)

Following divorce, the Supreme Court considered whether assets transferred between spouses for inheritance tax planning purposes became 'matrimonial property' subject to sharing. The husband had transferred £80 million to his wife to establish trusts for their children. The Court held that tax planning transfers do not matrimonialise assets unless the parties treated them as shared over time.

Facts

The husband, a highly successful investment banker, accumulated substantial pre-marital wealth before marrying the wife in 2005. In 2017, he transferred approximately £77.8 million in investment funds to the wife’s sole name as part of an inheritance tax planning scheme. The intended purpose was for the wife, who was non-domiciled, to establish discretionary trusts in Jersey for their two children, thereby avoiding UK inheritance tax upon the husband’s death. The wife never established the trusts and retained the assets. The marriage broke down in 2020, and divorce proceedings followed.

Asset Position

At the hearing, total assets were £132.6 million, with £95.7 million in the wife’s name (including the transferred assets, now worth £80 million) and £36.9 million in the husband’s name. The wife sought to have the transferred assets treated as matrimonial property subject to equal sharing.

Issues

The principal issue was whether the 2017 transfer of assets from the husband to the wife resulted in those assets becoming ‘matrimonial property’ subject to the sharing principle under section 25 of the Matrimonial Causes Act 1973, through a process termed ‘matrimonialisation’.

Judgment

The Supreme Court unanimously dismissed the wife’s appeal, upholding the Court of Appeal’s decision.

Key Legal Principles Established

The Court clarified several important principles regarding the sharing principle in financial remedy proceedings:

First, the sharing principle applies only to matrimonial property and does not apply to non-matrimonial property. Non-matrimonial property may only be redistributed under the needs or compensation principles.

Second, matrimonial property comprises assets that are the fruits of the marriage partnership or reflect the parties’ common endeavour. Non-matrimonial property typically includes pre-marital assets and property acquired by inheritance or gift from external sources.

Third, sharing of matrimonial property should normally be on an equal basis, with justified departures from equality diminishing once non-matrimonial property is excluded.

Fourth, non-matrimonial property may become matrimonial property through ‘matrimonialisation’. This occurs where the parties have, over time, been treating the asset as shared between them. The Court emphasised that matrimonialisation is neither narrow nor wide; the key question is whether the parties’ dealings with the asset demonstrate they treated it as shared over a sufficiently long period.

Fifth, transfers between spouses as part of tax planning schemes do not normally demonstrate that assets are being treated as shared. The intention is simply to save tax, not to share the capital asset.

Application to the Facts

The Court found that the transfer of the 2017 Assets did not result in matrimonialisation because the transfer was made in pursuance of a scheme to negate inheritance tax exclusively for the benefit of the children, not the wife. The parties’ intention was that the wife would use the funds to establish trusts for the children. There was nothing to show that the parties were treating the assets as shared between them over time.

Implications

This judgment provides significant clarification of the law on financial remedies following divorce, particularly in ‘big money’ cases. It confirms that the sharing principle does not extend to non-matrimonial property and establishes that transfers between spouses for tax planning purposes will not, without more, result in matrimonialisation. The decision provides greater certainty for estate planning involving inter-spousal transfers, while emphasising that the court will look at the substance and purpose of transactions rather than simply title to assets.

The case was remitted for a needs assessment to determine whether an award based solely on sharing principles would adequately meet the wife’s needs.

Verdict: Appeal dismissed. The Court of Appeal’s decision was upheld. The transferred assets (75% being pre-marital/non-matrimonial) were not matrimonialised and therefore not subject to the sharing principle. The matter was remitted for a needs assessment.

Source: Standish v Standish [2025] UKSC 26 (02 July 2025)