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In this article, our Head of Family and partner, Joanna Toloczko, considers the distinction between matrimonial and non-matrimonial assets and why the distinction is important.
The Courts’ Approach to Matrimonial & Non-matrimonial Assets
Although the majority of family finance cases are now settled by agreement between the parties, either before proceedings have commenced or at an early stage of, it is still necessary to bear in mind how a court would approach your case.
Why? As there would simply be no point in negotiating on a basis which would ultimately not find favour with a court.
Your spouse will have been advised as to the approach the court would take and is unlikely to agree to a settlement which would not be regarded by a court as a reasonable outcome for them.
The court generally adopts a three-stage process.
“The 3-Step Process”
The first stage is computation, which is the process by which the court takes account of the assets available for distribution and their value.
This is done via the disclosure process.
It is important to remember that you must disclose all of your assets, even if you believe that they should not be regarded as matrimonial assets and/or you, and your spouse, have provisionally agreed that they should remain with the party who owns them.
The second stage is the distinction between a matrimonial asset or a non-matrimonial asset or a mixture of the two.
During this process, the court looks at each asset and decides whether that asset should be regarded as a matrimonial asset or a non-matrimonial asset or a mixture of the two.
Finally, the third stage is distribution.
Simply, this is where the court decides which spouse should receive which asset.
So, Which Assets Are Matrimonial and Which Are Non-matrimonial?
Matrimonial assets are those which have been built up as a result of the efforts of the parties during the marriage.
On the other hand, non-matrimonial assets are those assets which were brought to the marriage by one party or were given to or inherited by a party during the marriage.
The family home is regarded by the court as being a special type of asset and even if it was brought to the marriage by one party, it is likely to be classified by the court as a matrimonial asset.
In certain circumstances, assets which start out as non-matrimonial assets, can become matrimonial assets, often because they have been “mingled” with matrimonial assets.
The Importance of the Distinction Between Matrimonial and Non-matrimonial Assets
The distinction between matrimonial and non-matrimonial assets is important as the court will normally take the view that matrimonial assets should be shared equally between the parties.
However, it is important to note that the sharing principle does not apply to non-matrimonial assets.
An equal share of the matrimonial assets would mean that the party who is in the more vulnerable financial position, often those who have custody of children, is not able to meet their needs, then the court may make an award which “invades” the non-matrimonial assets, to provide for those needs.
Alternatively, the court may take the view that the party in the more vulnerable financial position should receive a greater share of the matrimonial assets to meet their needs.
Matrimonial & Non-Matrimonial Assets: Pensions
In most needs-based cases, the court will take the view that the pension assets should be divided between the parties so as to provide for the equalisation of income upon retirement.
Therefore, in this type of case, the argument as to which of the pension assets are matrimonial or non-matrimonial, will usually be of little value.
However, there will still be a minority of cases where this argument is of value, for example, in cases which are not needs based and/or where the pensions are modest in comparison with the other assets.
Recent Case Law: Example
The Court of Appeal’s decision in the 2024 case of Standish v Standish is a leading case on the treatment of non-matrimonial assets, particularly with regard to the “mingling” or “matrimonialisation” of those assets.
The case concerned a 15 year marriage with two children. At the beginning of the relationship, the husband had assets worth £57 million. In 2017 he transferred assets worth £77 million to the wife’s sole name with the intention that she would settle those funds in an offshore trust, in order to avoid Inheritance Tax.
The wife failed to settle the funds in an offshore trust.
In the Court of Appeal case the wife argued that the transfer to her of those assets converted the assets to her “separate property” and they should be ring-fenced for her. Her alternative argument was that the assets were matrimonial property and should be divided equally between them.
The couple also owned a holiday property. The wife argued that property should be regarded as a matrimonial asset. Although it had been owned by the husband before the marriage, the family had holidayed there and had improved it during the marriage.
The husband argued that the assets which had been transferred to the wife in 2017 and the holiday property represented his pre-marital wealth and were non-matrimonial assets which should not be available for sharing.
The court took the view that the fact that the assets had been transferred to the wife’s legal ownership in 2017 was of little importance. The source of the asset was the most important factor when considering whether or not that asset should be shared.
The judgment acknowledged that the importance of the non-marital source of an asset may diminish over time. The judge also took the view that the sharing principle should apply in cases where only a modest percentage of the parties’ overall wealth could be regarded as the product of non-marital endeavour.
In a situation where non-marital property had been used to purchase the family home, normally the property should be shared equally.
However, in a situation where non-matrimonial property has been mixed with matrimonial property, a more nuanced approach should be taken.
Usually, the evidence will not establish a clear dividing line between matrimonial and non-matrimonial property. If such assets are treated as having been “matrimonialised” and therefore subject to the sharing principle, it will not necessarily mean that those assets should be shared equally. The non-matrimonial source of the money would remain a relevant consideration.
Before You Go…
It is not always easy to determine whether an asset is matrimonial or non-matrimonial.
An asset may start out as non-matrimonial but become matrimonial. Whether this has happened will depend upon the individual facts of the case.
The distinction between matrimonial and non-matrimonial assets will be less important in needs-based cases. If you find yourself in a position of confusion, please contact our Head of Family Law, Joanna Toloczko on 07756 288621 or at joanna.toloczko@bbslaw.co.uk for further information and guidance.
