Spouses

The property relationship between spouses is governed by the provisions of the Marriage Act. Should the spouses wish to establish a different arrangement than that stipulated by the Act, then this – in order to be legal – must be agreed to by contracting a marriage settlement. The financial arrangements made by the spouses will be of significance for the transactions they conduct while married, and for the distribution of property following marital breakdown, and in relation to matters of inheritance.

Joint property ownership, the normal arrangement as laid down in the Marriage Act, is established automatically when a marriage is contracted. Joint property ownership forms the basis for equal distribution of the spouses’ total assets at divorce, once each of the parties have deducted their liabilities. The joint property is distributed equally between the spouses because they have lived together in a union where there may have arisen mutual financial dependency and where capital is generated through joint efforts. But such considerations are not sustainable in every case; there are in fact certain joint assets that shall not be distributed equally. These arrangements are termed unequal division and priority rights.

If the spouses do not wish to follow the normal arrangement laid down in the Marriage Act, the agreement they make, to be valid, must be written down in a marriage settlement. Thus, a marriage settlement must be drawn up if the spouses wish to have complete or partial separate ownership of property instead of joint ownership. Separate ownership of property means that assets will be withdrawn from distribution and remain the property of the owner. Furthermore, a marriage settlement must be established if the spouses do not wish to be bound by the unequal division rules, or give one another gifts of greater value etc. A marriage settlement that satisfies the requirements of the law is binding on both the spouse and their heirs.

When spouses choose to go their separate ways, their property a divided between them. Each party may request a property settlement from the time at which separation is authorised.

When a property settlement takes place, the parties have contractual freedom; this means that they are free to arrange for whatever distribution of property they please, as long as they are in agreement. If they both wish, they can disregard an existing marriage settlement and even the provisions of the Marriage Act, but it is the marriage settlement and/or the provisions of the Marriage Act that will be the deciding factor should the parties not agree otherwise.

We always recommend that the distribution of property be set out in a contract, known as a property settlement, so that subsequent potential claims against each other can be avoided as much as possible.

It is the couple’s assets at the time when the marriage broke down (the point of marital breakdown), or when the county governor was notified of separation, that are distributed.

In connection with the distribution of common property, it is usual to prepare a list of the assets at the point of marital breakdown. This list often also specifies which assets are taken over by whom, as well as detailing the transfers that take place as a consequence of the distributive decisions made. For example, if one spouse takes over the home, he/she must be prepared to buy out the other spouse for a sum commensurate with the spouse’s equity in the house. Such summaries are generally referred to as pre-divorce checklists, and it is fairly common for them to be drawn up when the parties seek the advice of a lawyer.

If the parties fail to agree, they can apply for public administration and distribution of the property, as long as they have joint ownership, either wholly or partially, of their assets. Public administration and distribution is not generally not available in cases of sole ownership. Public administration and distribution means that it is the court, either independently or through the appointment of an administrator, which will manage the settlement. As a rule, a preliminary mediation meeting will be held with the intention of getting the parties to agree, with the involvement of the court, to all or part of the marriage settlement. If all the issues cannot be resolved in such a preliminary meeting, a follow-up meeting can be held in court or with an appointed administrator. If the parties are not able to reach agreement here, then the case will have to be resolved in a so-called probate action. In the main, this is a regular lawsuit, but in which there are certain special rules pursuant to the Probate Act when it comes to the preparatory proceedings and subsequent procedure. They may also choose to bring a civil action directly, i.e., without applying for public administration and distribution. This occurs mostly when there is a pronounced level of disagreement and the specific circumstances of the case are unsuited to further mediation/conciliatory discussions.