The retired banker who gave his wife 80 million pounds to avoid inheritance tax will not be split equally in the divorce

High net worth divorce cases will be significantly impacted by the Supreme Court's decision, according to family lawyers

After a divorce, the Supreme Court has decided that a retired banker who gave his wife almost 80 million dollars to avoid paying inheritance tax will not be required to divide the money equally with her.

The majority of the money had been earned before the marriage, so five judges unanimously decided that Clive Standish should keep the largest portion.

The court decided in Standish v. Standish that "matrimonalization" did not apply to a large wealth transfer in 2017 that was made to avoid inheritance tax and totaled more than 77 million.

An asset that has been accumulated or acquired during a marriage is said to be matrimonial. In most cases, both divorcing spouses have a strong claim to an equal portion of the marital assets. Usually, savings, pensions, and the family home are considered matrimonial assets.

The Supreme Court's historic decision upholds the idea that not all money transferred between spouses during marriage becomes matrimonial property, according to Nick Gova, partner and head of family at the London law firm Spector Constant & Williams.

"The courts' focus on the transfer's purpose in this instancetax efficiency and child care provisionis a crucial distinction.

According to Gova, the ruling gives couples important clarity that assets may continue to be non-matrimonial even if they are legally owned by the other spouse unless they are expressly treated as shared during the marriage.

"This will have a significant impact on high-net-worth divorce cases, particularly when estate planning or asset protection strategies are involved," Gova stated.

"Couples and their advisors need to be extremely mindful of how courts might interpret these transfers in the event of future disputes. Legal ownership is important, but so are substance and context.

In the Standish v. Standish case, what transpired?

In 2003, Mr. and Mrs. Standish started dating, and in 2005, they were married. Mr. Standish had already achieved success as a banker at the start of the partnership.

His assets were worth 57 million in 2004, according to a review of the case by the law firm Black Morgan. In contrast, Mrs. Standish had a Melbourne property, an inheritance, and some money in bank accounts at the time, which was a significant decrease in her assets.

In 2017, Mr. Standish moved 77 million dollars in investment funds from his sole name to his wife's sole name. The wife also received shares in the farming company.

Blake Morgan noted that the husband made these transfers for tax planning purposes, utilizing his wife's UK non-domicile status to evade inheritance tax.

According to financial advice given to the husband, the assets would be exempt from UK inheritance tax by undergoing this transfer.

Finally, for the benefit of the couple's children, Mrs. Standish was to put the assets in a discretionary trust in Jersey, according to Blake Morgan. However, this never took place.

The money, which accounted for the majority of the couple's assets, was therefore in the wife's sole name upon their separation.

In 2020, Anna Standish filed for divorce. Judge Justice Moor divided the family's 132 million dollar fortune in 2022, giving Mr. Standish 87 million and Mrs. Standish 45 million.

The majority of the money, including the 80 million in assets he transferred, was earned prior to the marriage, according to Mr. Standish's appeal against this ruling. Accordingly, he stated that the case should be handled solely by providing for the wife's reasonable needs, with him keeping the remaining assets.

The Court of Appeal judges decided in 2024 to lower Mrs. Standish's share to 25 million. In her appeal to the Supreme Court, Mrs. Standish claimed that although the assets had been matrimonial from the beginning of the marriage, they had become hers when they were transferred into her sole name in 2017.

Following two months of consideration, the Supreme Court ruled in the husband's favor.

Will all assets in a marriage be shared?

In the event of a divorce, not all marital assets are immediately divided equally.

There are exceptions and factors to take into account that go beyond a straightforward 50/50 split, even though the "sharing principle" is a starting point, which states that assets acquired during a marriage are typically regarded as matrimonial property and subject to division.

Assets acquired as a gift or inheritance during a marriage or those owned prior to marriage are considered non-matrimonial assets. If they haven't been mixed with marital assets, they might not be eligible to share.

The Court concluded in the Standish case that the assets in question were transferred for the purpose of inheritance tax planning and did not acquire the required "matrimonial character" simply because they were held in the wife's name during the marriage.

In the Freeths family law team, Stephanie Kyriacou, managing associate, stated: "The ruling upholds the idea that the source of wealth, marital treatment, and intention are still crucial factors in determining how assets should be divided in a divorce.

She continued, "This decision clearly shows that not all interspousal transfers are subject to the sharing principle." The parties' intention for the wealth to become a part of the marriage's financial foundation must instead be demonstrated.

"The Standish ruling raises the bar on what wealthier couples should think about in terms of documentation and planning," said Nick Gova of Spector Constant & Williams, a law firm.

He advised, "Now is the time to: audit and document your asset records, consider putting in place a pre- or post-nuptial agreement, and get your tax-planning documents in order, whether you're a high-net-worth individual or building family wealth."

Being proactive is not only prudent, but it may also safeguard your relationships and assets in the years to come.

Divorce and planning for inheritance taxes.

According to attorneys, the Standish ruling significantly affects the inheritance tax planning of affluent people.

The decision lessens the possibility that, in the event of a divorce, the financially stronger party will have to divide their assets equally if they attempt to use IHT planning to lower their inheritance tax liability.

"Until now, there has always been a conflict between inheritance tax planning and wealth protection," stated Will MacFarlane, a partner in Kinglsey Napley's family and divorce team.

The ability to transfer assets between spouses for inheritance tax planning is now permitted because it is no longer possible to assume that those assets will be matrimonialized. e. divided equally in the event of a divorce.

According to MacFarlane, a noteworthy aspect of the ruling is that matrimonialization is unlikely to have taken place if transfers made as part of an IHT planning exercise are obviously made for the benefit of the next generation or someone other than the asset recipient.

Mr. and Mrs. Standish could have avoided this litigation if they had signed a postnuptial agreement. This is another important lesson for family lawyers and wealthy individuals to learn from this case.

"Had they done so, the goal of the asset transfer to Mrs. Standish would have been made clear and agreed upon so that respective interests could have been protected," MacFarlane stated.