HW Legal
Division of the Marital Estate
Which assets will belong to each former spouse after divorce? What happens to marital property after the death of one spouse? What rules govern the division of the marital estate, and what should you watch out for?
The division of the marital estate is a key step following a divorce or the death of one spouse. For many people, the process can be stressful and difficult to navigate. Understanding the applicable rules, the available options, and the potential pitfalls can make the process considerably easier.
In this article, we explain the basic principles governing the division of the marital estate, the different methods of settlement, the role of agreements between spouses, and what happens if no agreement can be reached.
What Is the Marital Estate?
The marital estate arises automatically upon marriage unless the spouses agree on a different matrimonial property regime.
The marital estate typically includes:
- income earned by either spouse (salaries, bonuses, business income, etc.);
- property acquired during the marriage (real estate, vehicles, household furnishings and equipment);
- debts incurred during the marriage (such as loans and credit facilities).
The marital estate generally does not include property acquired by only one spouse through a gift, inheritance, or from that spouse's exclusive property.
When Does the Marital Estate Terminate?
The marital estate terminates upon the termination of the marriage. It may also be restricted or terminated during the marriage in certain circumstances.
Typical situations include:
- divorce;
- the death of one spouse;
- a court decision restricting or terminating the marital estate during the marriage.
In all such cases, the property relations between the spouses (or between the surviving spouse and the heirs) must be settled.
Settlement is also required where the scope of the marital estate has merely been reduced.
What Does “Settlement of the Marital Estate” Mean?
Settlement involves the division and resolution of the spouses' previously joint rights and obligations.
What Happens Between Termination and Settlement?
Until the marital estate is formally settled, it continues to operate largely as if it still existed.
In other words, the former spouses continue to hold rights and obligations relating to the former marital estate until a settlement is completed.
How Is the Marital Estate Divided?
There are three principal methods.
1. Agreement Between the Spouses
This is the quickest and least contentious option.
An agreement may be concluded either orally or in writing. However, written form is mandatory if the settlement concerns real estate or if the agreement was entered into during the marriage.
2. Court Proceedings
If the spouses cannot agree, either spouse may bring court proceedings seeking division of the marital estate.
The court generally starts from the principle that both spouses are entitled to equal shares of the assets and liabilities.
The court allocates individual assets to one spouse or the other and orders the spouse receiving assets of greater value to pay a balancing payment to the other spouse.
When deciding how the property should be divided, the court also considers:
- each spouse's contribution to the acquisition of the property;
- each spouse's contribution to the care of the family;
- childcare responsibilities; and
- contributions to the household.
3. Statutory Presumption After Three Years
If neither an agreement is reached nor court proceedings are commenced within three years of the termination of the marital estate, a statutory presumption applies.
Under this presumption:
- tangible movable items (such as furniture and household appliances) belong to the person who exclusively uses them;
- all other property, including real estate, becomes jointly owned by the former spouses in equal shares;
- debts and receivables remain jointly held in equal proportions.
What Should You Watch Out For?
The Three-Year Time Limit
Many people are unaware that if no settlement is reached within three years following divorce or the death of a spouse, the statutory presumption automatically applies.
This can be disadvantageous, particularly where the property structure is complex, involves business assets, or includes undisclosed liabilities.
Important: In the case of real estate, it is not enough merely to sign a settlement agreement within the three-year period. The transfer must also be registered in the Land Register, because the agreement becomes effective only upon registration.
Rights of Third Parties
The settlement of the marital estate cannot adversely affect the rights of third parties.
This is particularly relevant for creditors and co-owners.
For example, spouses cannot eliminate a joint debt owed to a bank or release themselves from loan guarantees simply by agreeing between themselves that one spouse will assume responsibility.
Formal Requirements
A settlement agreement must be in writing where required by the nature of the assets involved.
Where real estate is concerned, registration in the Land Register is also necessary.
Retroactive Effect of Settlement Agreements
Even if the spouses conclude their settlement agreement at a later date, the agreement takes effect retroactively as of the date on which the marital estate terminated or was restricted.
This may have important property and tax implications.
Division of the Marital Estate Following the Death of a Spouse
When one spouse dies, the marital estate must first be divided before the inheritance proceedings can be completed.
In practice, this means that the portion belonging to the surviving spouse is first separated from the marital estate, and only the remaining portion forms part of the deceased spouse's estate.
The heirs and the surviving spouse may also conclude an agreement regarding the division of the marital estate.
The surviving spouse is additionally a statutory heir and, under the first class of heirs, inherits together with the deceased's children.
This rule may be modified by a will or other succession arrangements.
How Can a Lawyer Help?
Legal assistance is often invaluable when dealing with the division of the marital estate, particularly:
- when planning a property settlement during the marriage;
- where significant assets, real estate, or business interests are involved;
- where one spouse is concealing assets or failing to disclose debts;
- where negotiations have broken down and litigation appears likely.
Our law firm has extensive experience with both negotiated settlements and court proceedings concerning the division of the marital estate. We can help protect your assets, negotiate fair terms, and resolve the matter as efficiently and smoothly as possible.
Need Assistance With the Division of the Marital Estate?
If you require legal advice regarding the division of marital property, do not hesitate to contact us. We will review your situation and help you find the most suitable solution.