Separation of property: what does this mean in the event of a divorce?

What is segregation of property?

Separation of property refers to a property regime under family law between spouses or registered civil partners. It provides for a complete separation of the respective assets. This means that both partners are completely free to dispose of their own assets; in contrast to the community of accrued gains , which normally occurs with a marriage and in which there is a restriction on disposal by the other spouse. In the case of separation of property, the spouses have a life together, but are economically completely self-determined and independent of one another.

The separation of property can easily be agreed by the spouses in a marriage contract at any time . In order for it to stand up in court, a notarial deed is required.
Good to know: If spouses exclude the equalization of accrued gains in the marriage contract and do not provide for any other marital property regime, the marital property regime of separate property automatically arises.

What is the benefit of segregation of property?

In the event of a divorce, the separation of property can make things easier, since there is no equalization of gains between the spouses. Each partner therefore retains possession not only of the assets that belonged to them before the marriage, but also of those that they have earned or otherwise gained during the existing marriage. The only exception to this is marital assets, such as household effects, the joint marital home or marital savings.
Attention: Unlike the equalization of gains, the equalization of pensions does not automatically cease if separation of property has been agreed. If this is desired, it must be recorded separately in the marriage contract.

Separation of property is particularly advantageous for entrepreneurs or the self-employed, as they do not have to fear that they will have to use business assets to equalize gains in the event of a divorce. Losses of assets can usually be effectively avoided in this way. But even in dual-income marriages without children, waiving the equalization of gains through the separation of property can reduce the costs of the divorce . Separation of property can also be agreed for purely positive motives, for example if one of the partners wants to join a company and keep the other out of possible financial losses.

Does the separation of property have any disadvantages?

Separation of property is not automatically advantageous for both partners. As a rule, the one who earns significantly more than the other partner benefits the most. Even if one of the partners has been out of work for a long time, for example to look after children together, separating property is probably not the fairest arrangement for both spouses. In addition, the separation of property also has some general disadvantages.

• Costs: As with any marital property regulation that deviates from the community of gains, there are also costs for the agreement on the separation of property, since a notary has to be paid for the certification. The fee depends on the total value of the existing assets. In this context, it should be noted that a subsequent agreement on the separation of property during the marriage is usually more expensive, since there are usually more assets at this point.
• Effort: In order to realize the separation of property, it is necessary for the spouses to prepare a precise list of their respective assets and update them regularly. This is the only way to keep track of who owns which asset and to whom it will be awarded upon termination of the marriage. Careful bookkeeping represents a relatively high effort for both partners, which increases even more if the separation of property is only agreed when the partnership or marriage has existed for a long time and many items have been acquired together.
  Note:If separation of property has been agreed, it is important when purchasing joint assets, such as a house, that both spouses are contractually defined and registered as buyers. Conversely, the separation of property does not protect against liability for joint debts.
• Tax: If the marriage is not ended by a divorce but by the death of a spouse, the separation of property can mean major tax disadvantages for the widow. Because in this case, the remaining spouse only inherits the statutory compulsory portion, which he – after deducting various allowances – must also pay full tax. It is therefore advisable to exclude the separation of property in the marriage contract, at least in the event of the death of one of the partners, so that the community of gains continues to apply.

Are there exceptions to the separation of property?

In certain cases, regulations on the separation of property can become void, so that the less wealthy partner is awarded some of the spouse’s assets in the event of separation. This is the case, for example, if the family court finds that one of the spouses is disproportionately disadvantaged. So if one partner has not gained any assets at all during the marriage, but the other a lot, the court can, under certain circumstances, order a new regulation of the division of assets. This can be prevented, for example, by the wealthier partner transferring certain assets to the other during the marriage, such as a newly purchased car or similar.

There are also exceptions in the event that one of the partners becomes seriously ill. If the sick person is not entitled to a pension or sick pay due to the fact that he was not gainfully employed during the marriage, the court can order alimony payments so that the social security funds are not burdened.

A third exceptional case is when one of the partners has worked for years without pay in the other’s business, has promoted it economically and thus increased the family’s assets. The court can then assume a tacit company formation, the so-called spouse company, which does not require any written documentation. In the event of a divorce, the assisting spouse would then have to be paid out, in extreme cases at half the value of the company.
Admittedly, such a judgment is rather rare, since the family court places very high demands on such cooperation – simple office work is usually not sufficient. However, any problems can be easily prevented by always receiving appropriate remuneration for the partner’s work during the marriage. In this way, later claims can usually be excluded.

So it turns out that separation of property is not the best choice in every marriage or not always for both partners. Therefore, the spouses should think carefully before agreeing on the separation of property and seek sufficient advice from a specialist lawyer. Once a contract has been concluded and certified by a notary, it is legally valid and can only be changed if there are formal errors, the applicable law has been violated or the spouses agree.