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Upon divorce, assets acquired or accumulated during the marriage ("matrimonial assets") are generally divided equally. However, you may feel that these assets should be protected if you have entered the marriage with significant pre-acquired wealth or received a substantial gift or inheritance prior to, during the marriage, or post-separation.
The distinction made by the law in England and Wales between matrimonial and non-matrimonial assets originated in the case of White v White [2000] UKHL 54 and is a crucial consideration on divorce, as they are treated differently by the courts when adjudicating on the financial split to be achieved. Decisions about financial settlement and how the Court views non-marital assets are often very fact-specific, but we have provided some guidance below to assist you.
Matrimonial v non-matrimonial assets
Matrimonial assets are any assets you or your spouse acquired or accumulated throughout your marriage. Marital assets may include, but are not limited to:
- The family home and other real property;
- Pensions and savings accounts;
- Cars and other vehicles;
- Furniture and other household contents;
- Stocks, bonds and other financial investments;
- Businesses.
At first blush, the Court would apply the sharing principle to assets of this nature. However, the parties' needs and financial resources will dictate whether there is to be any departure from this default position.
Conversely, non-matrimonial assets are any assets which were either:
- Acquired by one party before the marriage
- Acquired by one party by gift
- Inherited by one party
These assets are unlikely to be shared between the parties on divorce. However, this is not guaranteed, and not all non-matrimonial assets are excluded from divorce settlements.
Each case will be considered on its facts and assessed based on fairness, meaning that these assets might not be excluded from the divorce settlement if required to meet the needs of either party.
Issues arise where these assets blend during the marriage, making it difficult to determine what can be considered non-matrimonial. This is often the case in a marriage of a longer duration.
Each of the three common categories of non-matrimonial assets outlined above is considered in greater detail below.
Pre-acquired wealth
How pre-acquired wealth is handled on divorce is predicated on the value of the contribution and how the parties treat the asset within the marriage (White v White). The Court will consider the extent to which the parties kept the wealth distinct, specifically outside the matrimonial pot during the marriage. The Court will examine what other marital assets there are and, if divided, whether they would meet their needs. Even where assets are sufficient, the Court will still regard this pre-acquired wealth as a resource available to them.
Gifts
The law is clear that gifts between spouses are matrimonial. Parties cannot claim back gifts made to their partner in marriage unless the gift was given subject to a clear condition, for example, that it is to be returned if and when the union ends.
Gifts from others during the marriage are a greyer area. Gifts from family or friends are usually classified as gifts for the individual recipient and remain theirs on divorce.
However, this becomes less clear-cut when the gifts are converted into something else during the marriage, such as a gift of money later used to buy a car to share with their spouse. The car then becomes a marital asset.
Inheritance
Contrary to the law in other jurisdictions, inherited assets are not ring-fenced from distribution. However, parties may seek to argue that such assets are non-matrimonial, and the 'yardstick of equality' may be less relevant here.
The Court will distribute inherited assets as any other financial resource where the parties' and children's needs cannot be met without recourse to it.
Under s25(2)(a) of the Matrimonial Causes Act (MCA) 1973, the Court may have regard to '...other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future'.
Therefore, where a party may expect an inheritance in the future, the other may argue that the Court should consider this property.
To date, the courts have been unwilling to attach much weight to property that a party may inherit in the future for reasons of uncertainty (HRH Tessy Princess of Luxembourg v HRH Louis Prince of Luxembourg and Anor [2018] EWFC 77, [2019] 1 FLR 1203).
How to protect your non-matrimonial assets on divorce
If you want to protect your assets on divorce, we recommend having a pre-nuptial agreement drawn up or a post-nuptial agreement if you are already married. Although not strictly legally binding in England and Wales, the Court will consider these agreements when deciding how to divide your assets on divorce.
Both options provide methods by which you can potentially ring-fence your non-matrimonial assets. As per the landmark case of Radmacher (formerly Granatino) v Granatino [2010] UKSC 42, the courts set out that such agreements are to be afforded appropriate weight, provided certain conditions are met, including that both parties seek independent specialist legal advice.
Creating a trust over non-matrimonial assets can be another effective method to protect them. In a legal trust, a third party is given, for a limited duration, formal control over certain assets on behalf of their owner (the 'beneficiary').
Concluding thoughts
Understanding how best to protect your assets can be stressful and complex. Whilst the general principle is that marital assets will be divided, and non-matrimonial assets will not be, a principle of fairness will guide the courts, and judges are afforded wide discretion.
At Myerson, our team of expert family lawyers is here to help demystify the process and help you distinguish between your matrimonial and non-matrimonial assets. We are on hand to guide you on how best to protect your assets from a future divorce settlement to ensure you secure a favourable outcome for you and any children of the family.