Navigating a divorce is always challenging for clients. If they want to make the process as smooth as possible and ensure assets are split fairly, they may benefit from the support of a joined-up team of professionals.

The recent landmark Standish case demonstrates why it’s so important for solicitors and financial planners to work together to manage a client’s assets before, during and after a divorce.

Read on to learn more.

The Standish vs Standish ruling gives clarity about premarital assets

The primary dispute in the Standish vs Standish case revolved around £77.8 million of premarital wealth that the husband brought into the marriage.

The treatment of premarital wealth – assets that one party owned separately before the marriage – during a divorce is complex.

It’s up to the judge to decide if and when wealth becomes “matrimonialised”, meaning it is considered a joint asset. These joint assets are normally split equally between the couple. Meanwhile, individuals could retain any non-matrimonialised assets after the divorce.

In the Standish case, the husband bought £77.8 million of personal wealth into the marriage but later transferred it into his wife’s name and asked her to move it into a trust. His intention was to mitigate tax and preserve the wealth for their children.

However, his wife didn’t put the funds in a trust and, upon divorcing, claimed this wealth was a matrimonial asset that should be shared equally because it was in her name. The husband maintained that it was still his personal wealth.

After several appeals, the Supreme Court ruled in favour of the husband, setting out new guidelines about the treatment of premarital assets.

According to FTAdviser, the ruling stated that instead of simply considering who officially owns an asset, courts “must look to the original source and underlying intent” of any transfers of wealth.

This has significant implications for solicitors and financial planners.

Here are four ways that solicitors and financial planners can work together to prevent disputes and protect clients’ wealth during a divorce.

1. Create a clear and legal paper trail

In the Standish case, the wife believed she would be entitled to half of the £77.8 million because the wealth was in her name. Yet, the eventual ruling found this wasn’t the case because the husband didn’t intend for the wealth to stay in her name and only transferred it for tax purposes.

As a result of the ruling, it’s crucial that clients can demonstrate the purpose of any transfers of wealth. This means there needs to be a clear and legal paper trail for all financial decisions.

To achieve this, solicitors and financial planners must work closely together during a marriage to carefully document wealth transfers for future reference.

Equally, if a couple starts divorce proceedings, financial planners must be involved in the early discussions to value and trace the origins of all assets carefully.

2. Make watertight prenuptial and postnuptial agreements

Prenuptial and postnuptial agreements may be a useful way to ringfence certain assets – especially premarital wealth – and agree ahead of time how everything will be split during a divorce.

Solicitors and financial planners have equally important roles to play in creating these agreements.

A professional financial planner can help gather information about the financial position of both parties and their individual assets. This ensures any agreement considers all wealth, and how it factors into the wider financial plans of both individuals.

A solicitor can then manage the practical aspects of creating the agreement and ensuring it is legally binding.

Once this agreement is in place, premarital assets are adequately protected and couples have clarity, meaning they can avoid disputes like the one at the centre of the Standish case.

3. Manage complex financial structures such as trusts

Another key point of contention in the Standish case is that the husband transferred wealth and asked his wife to place it in a trust, but she failed to do this. Consequently, he was unable to enact his strategy for mitigating tax and preserving wealth for his children.

This was a unique case, but clients may face similar challenges with their tax and estate planning strategies because trusts can be incredibly complex.

Fortunately, a financial planner can carefully explain the tax implications of placing assets in a trust and explore the most efficient tax planning strategies.

With the help of a solicitor, clients can then create and manage trusts, so they can preserve their wealth and pass it to the next generation tax-efficiently.

4. Navigate the split of important assets such as property and pensions

The Standish case highlights how much difference decisions during a divorce settlement can make to a client’s future financial situation. The wife was initially offered £45 million but after the appeal and final decision, she received £25 million.

While still a sizeable sum, this decision will likely make a significant difference to the lifestyle she can afford in the future.

This is true in many divorces, especially when it comes to important assets such as property or pensions. If the split of these key assets is unequal, it could leave one party at a significant disadvantage in later life.

Unfortunately, fewer than 1 in 7 couples share their pensions during a divorce.

A financial planner can explain options for dividing these important assets to ensure that clients can achieve their long-term financial goals after the divorce.

Equally, solicitors may manage the various options involved with selling a property and sharing the proceeds during a divorce.

Get in touch

If you have clients navigating a divorce, we can help.

Email info@blueskyifas.co.uk or call us on 0118 987 6655 to learn more about how your clients might benefit from our advice.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning or trusts.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.