A Supreme Court ruling has given a “green light” to wealthy individuals transferring assets to avoid inheritance tax without fearing their spouses will share it if they split, experts say.

In a much-anticipated ruling, judges at the UK’s highest court unanimously decided that Clive Standish, a 72-year-old retired banker, would not be forced to split equally almost £80 million he had given to his ex-wife, Anna, 57, in a bid to mitigate the tax.

Standish, who had accrued the money before his marriage, argued that it should not be treated as matrimonial assets, even though it was held in his wife’s name. He had transferred the assets to his Australian wife to take advantage of her non-dom status and allow more money to benefit their two children.

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Standish expected her to use the money to establish two offshore trusts, but she never did so and remained the sole owner of those assets when divorce proceedings began.

The judge at first instance treated the assets as matrimonial and awarded the wife £45 million. However, the Court of Appeal ruled that the transfer of funds did not make them matrimonial assets and reduced her share to £25 million — a decision that the Supreme Court upheld.

Giving its judgment, the country’s top court confirmed the distinction between two categories: marital property — the fruits of the marriage partnership, even if generated by one “breadwinner”, which are subject to the “sharing principle”; and non-matrimonial assets — those acquired before the marriage or apart from it, to which the sharing principle does not apply.

It formulated a test to determine whether non-matrimonial assets have been “matrimonialised” by looking at the actions of the parties and whether the assets were intended to be and treated as shared. However, the court recognised that property that may have begun as non-marital may, over time and as evidenced by the intentions and actions of the parties, be treated by them both as joint and therefore be considered marital at the point of divorce.

The ruling shows that “possession is not nine tenths of the law”, Peter Burgess, a partner at the law firm Burgess Mee, says. It will bring “welcome clarity” for divorce lawyers and their clients, bringing an end to the “legal limbo” where some cases have been deferred pending the decision, he adds.

He says that tax planners and their wealthy clients “will breathe a collective sigh of relief” as the court has ruled that transferring assets to a spouse to minimise tax does not “matrimonialise” them. He explains that the source of funds, rather than their legal title, will be key. “It seems the Supreme Court saw no contradiction in a disclosure to HMRC that an asset no longer belongs to an individual after they have gifted it to their spouse, alongside a successful claim to the family court that it remains the property of that individual and shouldn’t be shared,” Burgess says.

But Jackie Hockney, a partner at HockneyGrey Consulting, a tax advisory firm, suggests that “such a contradiction is highly likely to spark HMRC’s interest”. She says that the ruling “muddles the tax position of beneficial ownership from the date of the gift, which is key to determining with whom tax liability falls, with potentially disastrous consequences for the donor spouse in certain transfers between married couples that are otherwise perfectly sensible forms of tax planning”.

Other lawyers disagree. Will MacFarlane, of the law firm Kingsley Napley, says that the decision brings greater clarity to financially stronger parties seeking to undertake inheritance tax (IHT) planning and helps to reduce the risk of them being exposed if their marriages break down.

Until now there has been a conflict between IHT planning and wealth protection, he says: “This is a green light for those seeking to transfer assets between spouses for IHT planning as it cannot now be assumed that those assets will be matrimonialised.”

Stephanie Kyriacou, of Freeths, says that the ruling “rebalances the scales slightly in favour of those seeking to ring-fence significant non-matrimonial assets, while confirming that fairness and needs remain paramount”. She says: “This is not a case of the wealthy shielding assets behind legal artifice; rather, it is a reaffirmation that fairness does not always mean equality.”

Sarah Norman-Scott, of Hodge Jones & Allen, suggests that it will now be harder to demonstrate that an asset has become matrimonial in nature, even if, as in this case, it has been transferred into the other spouse’s name.

Victoria Walker, a partner at Moore Barlow, advises that in future “families will need to keep tighter records to demonstrate that transfers were executed for specific purposes”. However, Jayne Martins, a partner at RWK Goodman, stresses that the needs of the couple and any children will always be the court’s first consideration and if matrimonial assets are not sufficient to meet those needs, non-matrimonial assets can be shared to meet them.

Lawyers predict a rise in disputes because the judges did not provide definitive guidance on when and how assets can be said to have been “matrimonialised”. Therefore, experts stress the benefit to couples of making a prenuptial agreement recording intentions and setting out what should be considered matrimonial or not.

“A prenuptial agreement would have saved the parties an awful lot of money in legal fees and the media attention,” Lisa Payne, of Wilsons Solicitors, says.