What are matrimonial assets and how are they distributed?

In divorce proceedings, assets are generally split into two categories: matrimonial assets, namely assets which were acquired by the parties throughout the course of the marriage; and non-matrimonial assets, which are assets which the parties obtained outside of the marriage. For example, matrimonial assets will normally comprise of the matrimonial home, earnings made during the marriage (note: if only one party worked, it will often be presumed that the other party contributed equally by maintaining the household and raising children etc.) and any investments or assets purchased during the course of the marriage. Conversely, non-matrimonial assets will generally consist of property or other investments obtained prior to the marriage, anything obtained by the parties post-separation, and any inheritance or other family-sourced wealth.

For matrimonial assets, a needs-based approach will be taken in the first instance, ensuring that at least the custodial parent (in matters involving children) or most vulnerable party has sufficient means to live and (where applicable) take care of the children of the marriage. In high-net-worth divorces, however, once the parties’ basic needs have been met, remaining assets are subject to the “sharing principle”, whereby each party is generally entitled to 50% of the remaining matrimonial assets, unless there is good reason to divide the assets in a different manner. 

As we know, although this explanation appears simple enough, in reality, there is often some blurring of the lines between what could be treated as a matrimonial asset and what is to be set aside from the assets which are to be shared between the parties as part of the divorce proceedings. A recent decision of the Supreme Court has developed this point further.

Standish v Standish

In Standish v Standish, the divorce between a high-net-worth couple gave rise to a dispute over approximately £80m which had been transferred to the wife by the husband around 3 years prior to the breakdown of their marriage. Originally, the intention had been to take advantage of Mrs Standish’s non-domiciled status in order to establish a tax-efficient structure for the benefit of the couple’s two children, however this failed to materialise. During divorce proceedings, Mrs Standish argued that these funds had been treated as matrimonial property and as such, should be subject to the sharing principle. The matter went back and forth on appeal by both parties until it was heard by the Supreme Court, which ruled that the assets were not matrimonial property, and as such, only 25% should be subject to the sharing principle, meaning that approximately 87% of the assets were retained by Mr Standish. 

The position going forward

In the wake of Standish v Standish, two principles have become clear:

1. Property which is not considered to be matrimonial is not subject to the sharing principle; and
2. Property which is treated as a matrimonial asset for the duration of the marriage can become “matrimonialised”.

The first of these points is, of course, to be approached with some caution in the majority of cases, as no court is likely to leave a vulnerable party with nothing simply because they came into the marriage with very little, especially where children are involved. For high-net-worth individuals, however, it is important to bear in mind that once everyone is taken care of and the matrimonial assets split, both parties will generally walk away with whatever else they brought into the marriage. 

The second of these points, however, is important to bear in mind. While one party might enter a marriage with significant assets, if these assets end up being used by or for the benefit of both parties, they could end up being incorporated with the rest of the matrimonial assets. For example, a rental property brought into the marriage by a husband but used to fund joint holidays would no longer be just for his benefit, and it may be considered unfair to thrust the wife into a standard of living below that which she had become accustomed to, simply because she didn’t purchase the property initially. 

Conclusion

Although not binding in Guernsey, the ruling in Standish v Standish will be at least persuasive in the Guernsey Courts. As such, high-net-worth individuals contemplating a divorce ought to consider not only the assets they brought into the marriage, but also how these assets were used by both parties over the course of the marriage. 

Of course, while it is helpful to have an idea of where matrimonial assets came from, this is a matter on which legal advice is crucial. If you are in the early stages of going through a divorce and would like to obtain initial advice on asset division, as well as continued support with the legal process, please contact Robin Gist, Charlotte Tomlinson, or Aimee Brown.