The Supreme Court should be giving its judgment in the coming months on Standish v Standish, a divorce case that illustrates how wealth planning during marriage can pose significant risks on divorce that might otherwise have been avoided.
The case revolves around the second marriage of a wealthy banker, Clive Standish, who built a considerable £132 million fortune before that marriage. During his second marriage as part of his tax planning, he transferred £77 million to his wife with the intention that it should be placed into a trust for the benefit of their children. The marriage subsequently broke down with the tax planning never having been put into effect.
At the time of the £77 million transfer, which had to be expressed as a gift for the tax planning to have worked, Clive Standish was not domiciled in the UK. It was intended that after a suitable period, this gift would be placed into an offshore trust, thus minimising exposure to Inheritance Tax. It is unclear whether that intention was agreed verbally or documented.
In making that transfer, the Family court at first instance viewed the gift as a matrimonial asset awarding Mrs Standish £45 million, considerably less than half of her husband’s wealth. She appealed, seeking closer to 50%.
That appeal spectacularly backfired in the Court of Appeal reducing the lump sum to £25 million, saying the source of the gift must be considered and that a large proportion of it was ‘non-matrimonial’ and not to be shared.
She appealed to the Supreme Court. Permission is only given to appeal to the Supreme Court where there are significant principles at issue.
The case is being closely followed by our Family team colleagues because of the impact it is likely to have on future cases.
The case also raises significant questions regarding wealth planning during marriage.
Those who bring considerable wealth to any marriage are advised to consider a pre-nuptial agreement. Put simply, a prenup is an agreement reached by both parties before marriage that determines how assets will be divided should that marriage or civil partnership fail.
Whilst it should be noted that prenups are not legally binding, they offer a large degree of certainty as to how the courts will determine the division of assets and can be used to ringfence assets brought to a marriage.
You can read more about pre-nuptial agreements in this article by our Family team here.
In the Standish case, even if they had a prenup in place, they should have considered having a post-nuptial agreement to deal with how the gift should be treated if they were ever to divorce.
Like pre-nuptial agreements, post-nups are not legally binding in England and Wales but will be upheld so long as certain criteria are met should parties later separate. To be upheld the outcome of a prenup must not be manifestly unfair and there must be no coercion or duress to enter into the agreement.
In this instance, a postnup may have made it clear whether the transfer of assets was to be an outright gift or a conditional gift of arrangement. It would have saved both parties considerable time and money and provided them with certainty.
When considering sizeable gifts or transfers of cash or assets between spouses it is essential to take early and independent advice.
Contact our Private Client Solicitors
If you are in need of advice or assistance on any of the legal issues mentioned in this article, please contact Olivia Meekin, Partner or any member of our experienced Private Client team on 020 7631 4141 or email privateclient@bishopandsewell.co.uk in the first instance.
You can also contact our Family team by emailing family@bishopandsewell.co.uk or by calling the telephone number above.
The above is accurate as at 21 May.
The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
