Matrimonialisation of assets and divorce
If spouses divorce and there are sufficient resources to meet needs, consideration is given to the sharing of matrimonial assets. What are considered to be matrimonial assets though is not always straightforward. Non-matrimonial assets can become matrimonialised and what you might consider to be matrimonial could actually be non-matrimonial.
There are various factors in the law and principles to take into account when working out how finances should be dealt with when spouses divorce. Section 25 of the Matrimonial Causes Act 1973 sets out the criteria to be taken into account when working out how finances are dealt with on divorce. Regard must be had to “all the circumstances of the case”, with the first consideration being given to the welfare of a child of the family who has not reached the age of 18. The legislation as it currently stands provides for a wide range of discretion. The courts have developed guiding principles to assist in the exercise of that discretion, the overall aim being to achieve a fair outcome based on the unique and individual circumstances of each divorcing couple.
What are considered to be matrimonial assets (in cases where needs are met and the sharing principle applies)?
The law draws a distinction between matrimonial and non-matrimonial assets. With the starting point being that matrimonial assets should be divided between the divorcing spouses on a equal basis. Non-matrimonial assets on the other hand should not be subject to the sharing principle, although non-matrimonial assets can in some cases be taken into account within a divorce financial outcome, for example if there is not otherwise sufficient resources to meet needs or in some cases where the compensation principle is applicable.
In general terms, this distinction between what is matrimonial and non-matrimonial turns on the source of the assets. For example assets that are owned in a spouse’s own right prior to the marriage, inheritance, or a gift from an external source are typically non-matrimonial whereas assets that are earned, acquired or gained during the course of the marriage are likely to be matrimonial.
However, the importance of the source of the asset may diminish over time. What may start out as a non-matrimonial asset may become matrimonial, the law refers to this as “matrimonialisation”. The key is to look at intentions of the spouses and how the spouses treated the relevant asset over a period of time. The mixing of non-matrimonial assets with matrimonial assets can cause the non-matrimonial assets to become matrimonialised. The investing of non-matrimonial assets into the home where the spouses live together is likely to matrimonialise the non-matrimonial assets. If the value of a matrimonial asset increases significantly over time it may diminish the significance of the initial contribution by one spouse of non-matrimonial assets.
Investigating and working out what element of a matrimonial asset is non-matrimonial can be difficult, costly and disproportionate. The court therefore also take the view that this concept of matrimonialisation, where non-matrimonial assets become matrimonial regardless of its original source, is also in some cases pragmatic.
What is not determinative in deciding what is and what is not a matrimonial asset is who has the legal title/ownership to the asset, as that would not be in accordance with the discrimination and sharing principles. Just because an asset is held in the name of one spouse doesn’t automatically make it theirs and non-matrimonial. Likewise, if a non-matrimonial asset is transferred from one spouse to the other that doesn’t necessarily then make it matrimonial. Rather than look at legal title/ownership you have to consider how the spouses have been dealing with the asset and whether this shows that, over time, they have been treating the asset as shared between them.
Matrimonialisation essentially rests on the spouses, over time, treating the asset as shared. For example where one spouse has used an inheritance for the benefit of the family during the marriage it is likely to be considered that the spouses had elected to treat the inheritance as matrimonial even though the origin of the asset was from outside the marriage.
A transfer of a capital asset with the intention of saving tax does not necessarily establish that the spouses are treating the capital asset as shared between them. The case of Standish v Standish [2025] UKSC 26 illustrated this. In summary, in this case £80 million of assets (75% of which were accrued before the marriage and sourced solely from the husband) had been transferred to the wife in pursuance of a scheme to negate inheritance tax exclusively for the benefit of their children. There was nothing to show that, over time, the spouses were treating this asset as shared between them. The spouses intention was that the £80 million should not be retained by the wife but should be used by her to set up trusts for the children, thereby negating inheritance tax. In short, there was no matrimonialisation of the non-matrimonial proportion of the £80 million (the 75% accrued before the marriage and sourced solely from the husband) because, first, the transfer was to save tax and, secondly, it was for the benefit of the children not the wife. The £80 million was not being treated by the husband and wife for any period of time as an asset that was shared between them. Therefore, the court in this case decided that the husband should retain the 75% as that remained non-matrimonial so should not be shared and the 25% which was matrimonial should be shared equally.
The sharing principle has to be tied back to seeking a fair outcome, so consideration needs to be given to whether fairness requires or justifies the asset being included within the sharing principle. The spouses treatment of what was initially a non-matrimonial asset, over time, as shared between them, is central in deciding the fairness of that asset being viewed as matrimonialised.
It is essential to remember that the importance of what is matrimonial or non-matrimonial is really only relevant when the sharing principle applies, in many cases the sharing principle is not applicable because there are only sufficient resources available to meet needs and after meeting those needs there is nothing surplus to share. The spouses and, if they have children, their children’s needs are always prioritised above the sharing principle.
You are likely as a matter of course to seek tax and financial advice during financial planning for your future. It is important you consider seeking advice from a specialist family law lawyer too, so you are aware of the impact of a divorce and what steps you can take to prevent issues arising.
To avoid complicated and costly legal proceedings to work out what is matrimonial or non-matrimonial in the event of a divorce, a Pre or Post Nuptial Agreement maybe able to help. Pre (entered into before marriage) and Post (entered into after marriage) Nuptial Agreements are entered into to set out what the financial arrangements would be if the marriage doesn’t work out.
In the event of a divorce, Mediation or the Collaborative Process may be able to help spouses to successfully resolve issues and find solutions together without the need for court proceedings.
If emotions are running high causing a breakdown in communication and the escalating of issues, consider seeking the assistance of a Family Consultant.
More often than not working through emotions and talking matters through with a multidisciplinary team in place to provide the professional support and advice needed results in it being possible for spouses to reach an outcome on terms that they each feel are acceptable to resolve matters. The team you need is likely to consist of legal, financial, tax and therapeutic experts.
If an impasse is reached, for example on an issue of whether an asset is matrimonial or non-matrimonial, an Early Neural Evaluation might be able to help find a way forwards.
If an outcome can’t be worked out between the spouses by way of an agreement, Arbitration can be a very effective route to determining the issues and concluding matters.
Sometimes Court Proceedings are necessary. You should be aware though that court proceedings can only be used in circumstances where no other process would be appropriate. There can be significant cost consequences if you do not try to resolve matters using non-court dispute resolution (NCDR) when it is appropriate to do so.
Family Law Partners has a range of specialist experts including lawyers, mediators, family consultant, Early Neutral Evaluators and Arbitrators. If you would like to find out more about how we can help you please contact us.
Gemma Hope is a Director, Solicitor, Mediator & Collaborative Lawyer in our Brighton office.