If you are thinking about separating, or currently going through a divorce or dissolution of a civil partnership, you may be wondering what happens to the assets you owned before the relationship began. Are they safe? Can your spouse make a claim on them? What does the law say about such assets?
A recent decision by the UK Supreme Court (UKSC), in the case of Standish v Standish has confirmed that non-matrimonial assets, such as premarital wealth, will not necessarily be subject to sharing unless they have somehow been turned into matrimonial assets.
‘Just because an asset was brought into the marriage by one party does not automatically mean it is off the table in a divorce; but it also does not mean you will definitely have to share it,’ explains Debra Taylor, a Chartered Legal Executive in the family law team with Richard Reed Solicitors. ‘The courts aim to be fair and the UK Supreme Court has recently made clear that premarital wealth will not be shared as a rule. So, with the right strategy and preparation, we can help you protect premarital assets.’
What are premarital assets?
Premarital assets are things you owned before you got married. This might include:
- properties;
- savings and investments;
- business assets; and
- family wealth, such as an inheritance.
It is important to remember that such assets might be co-owned with other parties, such as an inherited property shared with siblings, or a trust fund held by others for your benefit.
In general, the courts will consider whether these assets should stay with the person who brought them into the marriage, but it has to consider if it would be fair to do so.
Matrimonial or non-matrimonial?
Assets are categorised into two neat categories: matrimonial and non-matrimonial:
- matrimonial assets are things built up during your marriage, and often viewed as joint assets;
- non-matrimonial assets are what each of you brought into the marriage or received independently.
Premarital assets, therefore, fall into the non-matrimonial pot at the outset.
Needs or sharing?
When dividing assets, the courts look at two main considerations:
- needs – making sure each of you (and any children) are properly housed and financially secure; and
- sharing – dividing the assets built up during the marriage fairly, often in equal proportions.
Generally speaking, needs will usually trump sharing where one party (or any children of the marriage) would be left with inadequate housing or money to pay the bills if matrimonial assets were simply shared 50/50.
In terms of the non-matrimonial assets, such as premarital wealth, needs might still have to be funded from these if matrimonial assets are insufficient to do so. However, they will not be shared out just because there has been a long marriage.
What has the UK Supreme Court said in Standish v Standish?
In this particular case, the husband brought significant family wealth into the marriage which lasted 19 years. As part of inheritance tax planning, he transferred some of these assets to his wife during the marriage, with the objective of eventually passing a greater share of his wealth to his children.
The UK Supreme Court had to decide whether this tax-planning activity had turned the assets into matrimonial assets.
In this case the Supreme Court concluded that the assets had not been mingled into family life, and they were only transferred for tax-efficiency for the benefit of the children (rather than his wife). Consequently, the Court determined that this action had not turned the husband’s premarital assets into matrimonial assets.
This landmark ruling has provided clarity around what should happen to non-matrimonial assets when it comes to sharing out assets, instead of meeting needs. The courts are focused on what is fair, and premarital wealth can be protected from a divorce, when everyone’s needs have already been met by matrimonial assets.
The case also highlights a very important point about transfer of assets between spouses for tax planning purposes, which is that such an action does not in itself make a non-matrimonial asset a matrimonial one.
Can I rely on the recent UKSC decision to protect my premarital wealth?
The recent court ruling is very clear and sets a firm precedent about ringfencing non-matrimonial assets and premarital wealth on divorce. However, the law is always changing, and each case will turn upon its own facts.
If you are concerned about protecting premarital wealth, here is a list of steps you can consider and discuss with your solicitor:
- enter into a prenuptial or postnuptial agreement, and this will set out that your premarital assets are not to be shared on any future divorce;
- keep premarital wealth completely separate to marital life, and do not mingle premarital assets with marital property, investments and expenses; and
- as well as family law advice, seek tax planning advice to ensure that steps taken for tax-efficiency will not turn your premarital assets into matrimonial assets.
How we can help
Whether you’re planning for the future, or navigating a divorce now, our experienced family law team are here to help.
For further information, please contact the family law team on 0191 567 0465 or email [email protected] This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
