As a family practitioner, I am often asked what will happen to assets that have been inherited during the marriage. In a recent case of St v AR [2025] HHJ Vincent tackled this issue. The case involved whether inherited wealth had been “matrimonialised” i.e. had become matrimonial. The case shed light on how courts approach complex scenarios.
Facts:
- This was a 20-year marriage.
- The Husband was 70 years old and had benefited from c.£121m inheritance from his grandparents which was being managed in a private equity investment company on his behalf. The Husband inherited the assets jointly with his brother, who was called to give evidence and did not agree to the assets being liquidated.
- The Wife was 51 and had not worked for the majority of the relationship. The Wife claimed that the Husband had an active involvement in the management of the investment portfolio.
- There was one child of the marriage whose future was secured through significant trust funds.
- The Couple had a very lavish lifestyle.
The Husband’s position was that after tax (which would be considerable due to the investment starting in 1940 and CGT having rolled over which would be payable upon sale or disposition) his interest in the investment would be £12.5m.
The Wife’s case was that the investment should be valued at £126.7m with no allowance made for tax as she claimed that the Husband had no intention of selling the investment.
The Husband offered the Wife a lump sum of £11m and the Wife initially sought a payment of £27m and later reduced this to £23m.
The Judge awarded a lump sum of £13.75m to the Wife, which meant that the Husband retained 91% of the assets and the Wife obtained 9% of the assets. The award was as follows:
- The family home was transferred to the husband.
- A sum of £4m to rehouse the wife, including SDLT, renovation, furniture etc.
- A capital sum to meet the wife’s income needs of £8m. That was broadly £320k p.a. for herself and £30k for the child, with a 10% uplift for contingencies, so £385k p.a. and a 25% reduction at the wife’s retirement.
- An ‘enhancement/contingency award’ of £1.5m to deal with the concept of fairness being elastic, given the husband will have over £100m in his possession and can make financial choices as he likes, so the wife should have some similar freedoms.
- £250k towards the wife’s costs liability (because, in the Judge’s opinion, this was a needs case, and she had a litigation loan to discharge).
The Court valued the Husbands inheritance at £120.8m but recognised that this was largely illiquid due to the tax implications and the brother’s intentions to preserve the inheritance for future generations. The Judge did not find that any actions taken by the Husband had matrimonialised the assets.
This is one of the first cases to positively cite the Court of Appeals landmark decision in Standish v Standish which set our clear guidance as to the concept matrimonialisation which it said should be “narrowly applied” and confirmed that the source of assets is important when wealth is non-matrimonial. This is hugely helpful to a spouse seeking to protect their inherited wealth.
The case also confirms that when determining complex asset structures, the courts will acknowledge illiquid assets and factor in any tax liabilities and investment restrictions when considering the overall valuation of the asset.
A key consideration in this case to the court finding that the husband’s investments were non-matrimonial was his passive investment approach in that the funds were managed for him, and he did not have an active role in their growth.
Takeaways:
- Judge’s will take a tailored approach when considering a parties’ long-term needs and security and may not significantly invade non-matrimonial funds to achieve this.
- When looking at claims involving inherited wealth the court will closely examine the assets source, use and whether it has been intermingled into the marriage.
- Illiquid assets provide for a more complex landscape and robust evidence will be needed to establish their value and any tax implications.
As we await the Supreme Court hearing of Standish v Standish in the Spring of this year, it will be interesting to see how the courts approach the principle of matrimonialisation particularly given the current guidance that this should be applied narrowly. In the meantime, what is evident is that divorcing couples will need to think carefully before pursuing claims over assets that were brought into the marriage from a non-matrimonial source.
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Emma Stamp is a Senior Associate in our Family Law team, specialising in working with clients to resolve issues relating to divorce and separation, including finance and private children’s arrangements.
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