The UK Supreme Court has held that transferring assets to your spouse to save tax does not make those assets matrimonial and subject to the 50/50 sharing principle.
Background
- The husband is 72, the wife 57.
- The parties married in 2005.
- They have two children.
- They separated in 2020.
- The marriage was circa 15 years and classified as a long marriage.
- The husband transferred to the wife, a portfolio of investments worth £80 million at the time of the trial (the 2017 portfolio). That transfer was part of a tax planning scheme. The couple had planned for the wife to place those assets in trusts for the parties’ children, with a view to avoiding inheritance tax.
- The wife never set up the trusts; she held the assets in her sole name.
The proceedings
The trial Judge held the majority of the 2017 portfolio was non matrimonial property, but a proportion had been matrimonialised by virtue of the transfer from husband to wife. The Judge ordered all the assets should be shared, but taking into account the origins of the 2017 portfolio, it was ordered there should be 60/40 division in the husband’s favour. This award saw the wife receive £45 Million.
Both parties appealed.
The Court of Appeal decided the husband was entitled to 75% of the 2017 portfolio, outright (i.e 75% should not fall subject to the sharing principle) and the remaining 25% should be shared 50/50. This resulted in the wife’s award being reduced to £25 million.
The wife appealed to the UK Supreme Court.
The UK Supreme Court upheld the decision of the Court of Appeal, albeit for different reasons.
The Law
The Court set out 5 core principles which enabled them to uphold the decision : –
- Non-matrimonial property; usually inheritance or assets built up by one party prior to the marriage, is different to matrimonial property; being the product of the partnership and joint endeavour. The question of in whose name the asset is held, does not dictate whether it is matrimonial or non-matrimonial.
- The sharing principle applies to matrimonial property only (subject to any “invasion” of non-matrimonial property required in respect of arguments as to “needs” and “compensation”).
- The sharing principle provides that, as a starting point, matrimonial property should be divided 50/50. There may be cases where a departure from equality is justified, but an equal division is the starting point.
- Assets which may be non-matrimonial property can become matrimonial property during the course of a marriage- there can be of “matrimonialisation”. Whether that transformation has happened depends on the facts of the case and how the parties have dealt with and treated the asset during their marriage.
- Finally, a transfer between husband and wife in a bid to save tax is unlikely to be sufficient to find there has been matrimonialisation of the asset or assets concerned.
The Judgement can be found here: Standish (Appellant) v Standish (Respondent)
