Dividing marital property

One of the most contentious issues during a divorce is the division of marital property. How should the assets and/ or debts be divided? What is private property and what is communal and thus jointly owned?

The answer largely depends on which rules are applicable to your marital property. In an international context, determining which law is applicable to your marital property can be a bone of contention in itself. It can even change over time!

Applicable law

Couples are free to choose which law is applicable to their marital property, for example in a prenuptial agreement. However, most couples do not make a conscious choice for a marital regime when they get married. The first step for your divorce lawyer is then to determine which law is actually applicable.

According to international treaty law, if parties have a joint nationality, then in the main, the law of their joint nationality is applicable to their marital property.

If parties do not have a joint nationality, then the law of the country where parties had their first residence after the marriage determines what law is applicable

The place where parties were married is in itself not relevant in determining which law is applicable.

However, applicable law can also change through naturalisation, immigration or after 10 years of residence in a particular country.

Dutch law on marital property

If you did not conclude a prenuptial or postnuptial agreement stating otherwise, and you were both living in the Netherlands at the time of marriage, then Dutch law may well be applicable to your marital property.

Even within the Dutch context, as of the 1st of January 2018 limited community of property has been introduced, creating two marital property regimes. This new legislation is only applicable to marriages concluded after the 1st of January 2018. The old system of universal community of property is still valid for all marriages concluded before January 1st 2018.

Universal community of property

The universal community of property regime in force until 2018 entails that upon divorce both spouses are each entitled to 50% of all property. All property really means virtually all property (both assets and debts), except for certain gifts and inheritances. This includes everything the spouses brought into the marriage as well as everything they acquired during the marriage. Legally, there is no individual money or property, even if accounts or property are in one name.

When agreeing a divorce settlement, parties may deviate from the 50/50 principle, but this may have tax implications if either spouse receives significantly less than their portion. The courts virtually always adhere to the equal division of property, so going to court is not necessarily an advantage.

The system may seem simple, but it sometimes leads to unfair results. For example, if one spouse incurs a debt without the knowledge of the other, they are both still liable for 50 % of the debt after divorce, even though one may never have been aware of the debt.

Limited community of property

If you were married after the 1st of January 2018, then a limited community of property is applicable to your marital property. Only property and earnings acquired during the marriage are communal. Property acquired before the marriage is exempt.

Again, not as easy as it sounds, as upon divorce you will have to prove what property (not just real estate!) you brought into the marriage, which is not always easy with the passage of time. We therefore advise you to put down in writing at the beginning of your marriage what you both own.

Disputes could also arise from the financing of joint assets, say the marital home. If one party invests with capital from before the marriage, they may be entitled to a refund of that investment, before the value of the home is split. It gets more difficult to decide, the more parties finances are intertwined.

The new legislation does not preclude the need for prenuptial agreements, particularly for business owners.

I did not want to marry in any community of property

Not all foreign couples living in The Netherlands fully understand the implications of marrying under Dutch law. Therefore you may want to change their marital regime after you are already married. Under certain circumstances, you can conclude a postnuptial agreement nullifying the community of property, without having to pay gift tax, as long as you revert to the original property share as of the time of marriage. However, there is a limited timeframe after marriage that you can make use of this tax ruling.

If you have further questions about dividing marital property, please feel free to contact us.