Wealthy retiree, formerly a banker, evaded inheritance tax by gifting his wife £80 million, but won't experience an equal asset division in their impending divorce.
Supreme Court Rules in Favour of Clive Standish: Non-Matrimonial Assets Remain Separate
In a landmark decision, the Supreme Court has ruled that retired banker Clive Standish does not have to split his £80m fortune with his ex-wife following a divorce. The case, known as Standish v Standish, has significant implications for high-net-worth divorce cases and inheritance tax planning.
The court's emphasis in this case was on the intention behind the transfer, specifically tax efficiency and provision for the couple's children. Mr. Standish transferred £77 million to his wife, Mrs. Standish, for inheritance tax mitigation purposes. However, the court found that this transfer was intended for the children, not Mrs. Standish’s personal benefit, so the asset retained its non-matrimonial character.
The ruling establishes a clear test for when assets originally non-matrimonial become matrimonial property. This test requires a clear intention by the contributing spouse to share the asset with the other spouse and conduct over time that demonstrates the asset was treated as shared matrimonial property.
The Court emphasized that a mere unilateral transfer of assets during marriage, especially if done solely for tax or inheritance planning purposes, does not automatically render those assets matrimonial property.
This ruling protects against opportunistic claims at divorce that treat transfers made for tax planning as matrimonial assets. It also reinforces that non-matrimonial assets from before marriage or inheritance stay separate unless clear joint sharing is proven.
The judgment provides valuable clarity for couples, stating that unless assets are clearly treated as shared during the marriage, they may retain their non-matrimonial character, even if legally held by the other spouse.
Another lesson from this case for family lawyers and wealthy individuals is that entering into a postnuptial agreement could have avoided this litigation. Wealthy individuals should audit and document their asset records, consider putting in place a pre or postnuptial agreement, and get their tax-planning documents in order.
Will MacFarlane, partner in the family and divorce team at Kinglsey Napley, stated that this ruling is a green light for those seeking to transfer assets between spouses for inheritance tax planning, as it cannot be assumed that those assets will be matrimonialised.
The wife, Anna Standish, issued divorce proceedings in 2020 and the High Court judge initially split the family's wealth of £132m. However, the transfer of over £77m in 2017 to avoid inheritance tax was not subject to "matrimonialisation".
Stephanie Kyriacou, managing associate in the family law team at Freeths, stated that the judgment reinforces the principle that intention, treatment during the marriage, and the source of the wealth are central to whether assets should be shared on divorce.
In conclusion, the Standish v Standish case significantly clarifies asset classification in divorce, especially regarding the intersection of matrimonial property and inheritance tax planning, ensuring both family courts and tax authorities consider intent and conduct rather than just legal title or timing of transfer.
In light of the ruling, high-net-worth individuals might consider revisiting their estate planning strategies, as the court highlighted that transferring assets for tax planning purposes doesn't necessarily classify them as matrimonial property. This decision could also influence business and finance decisions, as the Standishes' property and pension savings were not deemed to become shared assets due to the court's emphasis on the original intention behind the transfer.
