We often hear about protracted, lengthy, and complicated divorce proceedings. One way to ease this unpleasant process is a prenuptial agreement. Most people avoid this written agreement because they believe it implies divorce. This mindset is particularly common among the older generation. However, according to lawyers, this way of thinking is mistaken. Rokas Puodžiūnas, a lawyer at the law firm AVOCAD, notes that a prenuptial agreement is an excellent tool for regulating financial matters within a marriage without affecting the spouses’ personal relationship. So, what is the essence of a prenuptial agreement, what can be stipulated in it, and what are the consequences of entering into such an agreement?
A prenuptial agreement is an agreement between the spouses setting out their property rights and obligations during the marriage, after divorce or during separation. The essence of a marriage contract is to determine the legal regime of one's property other than that provided for by the law, and to determine and define the other property rights of the spouses, which are enforceable by agreement between the spouses.
The law therefore allows spouses to decide on their own property relations. A marriage contract can settle 3 groups of property issues:
- The legal regime of the property.
- Spousal maintenance.
- Division of property in the event of divorce or legal separation.
Legal regime of the property
The law provides that, in the absence of a marriage contract providing for a different legal regime, matrimonial property acquired before the marriage is the separate property of each spouse and property acquired after the marriage is to be considered as community property. The marriage contract allows for a different legal regime of property than that provided for by law.
The community property includes:
- assets acquired after the marriage in the name of both spouses;
- income from assets owned by one spouse in his or her separate property;
- income derived from the joint activities of both spouses and income derived from the activities of one spouse, excluding funds necessary for the spouse's professional activities;
- an enterprise and the income derived from its activities or other business;
- income received after the marriage from the employment or intellectual activity of the spouses or of one of them, dividends, pensions, allowances and other benefits other than those intended for a specific purpose (for example, compensation for damage to health and non-pecuniary damage, targeted material support for one spouse only, etc.).
The spouses dispose of the community property by common agreement. The spouse's share in the community property may be enforced against the spouse's personal debts. In the event of divorce, the court must decide on the division of the matrimonial property.
The marriage contract can stipulate that:
- Property acquired both before and during the marriage is the personal property of each spouse. Under this regime, not only assets acquired before the marriage remain the separate property of each spouse, but also assets acquired after the marriage become the separate property of each spouse. It should be noted that the choice of this type of regime does not affect the obligations relating to the satisfaction of the family's needs (e.g. child support; home maintenance expenses). The statutory limits on family property must also be respected. Under this regime, the bailiff will not be able to enforce against the other spouse's assets.
- Property acquired by each spouse before marriage and owned by them individually becomes their community property after the marriage is registered. Under this regime, assets acquired by each spouse before the marriage also become community property after the marriage. In that case, assets acquired before the marriage may be transferred by a spouse only with the consent or authorisation of the other spouse, and the other spouse's share of those assets may be subject to recovery in respect of the other spouse's personal debts. In the event of divorce, these assets are part of the matrimonial property to be divided between the spouses.
- Property acquired during the marriage is community property. Under this regime, assets acquired during the marriage will belong to the spouses in predetermined shares. The marriage contract must either expressly state the shares in which the spouses are to acquire the property, or it must expressly address the rules for determining the shares (e.g. the property will belong to each spouse in the proportion 50:50).
The spouses can also agree in the marriage contract to a mixed property regime. Suppose that one of the above regimes applies to one part of the property and the rest is subject to the other property regime.
As mentioned above, in addition to the regime applicable to the property, the spouses may also determine how the property is to be divided upon divorce and make provisions for maintenance between the spouses.
Drawing up a prenuptial agreement
Only spouses, or persons intending to marry, can conclude a marriage contract. A marriage contract is therefore classified according to the point in time at which it was concluded into:
- pre-nuptial agreement;
- prenuptial agreement.
As the name suggests, a pre-nuptial agreement is concluded before the marriage and a post-nuptial agreement after the marriage. The post-nuptial agreement is valid for the spouses from the moment of its signature or from a future moment agreed by the spouses. The only difference between them is the moment of conclusion. Therefore, persons may have been married for more than 10 years and decide to conclude a prenuptial agreement. The parties may also agree that certain provisions of the contract will apply after a certain period of time (e.g. after 3 years of marriage) or that the relevant provisions will cease to apply after a certain period of time. In any case, the pre-nuptial agreement does not enter into force until after the marriage.
The marriage contract must be in writing and certified by a notary public; failure to comply with the required form will result in the contract being considered invalid. Once the contract has been concluded and notarised, it must be registered in the Register of Marriage Contracts and can only be used against third parties once it is registered.
The marriage contract can be terminated at any time by mutual consent of both spouses. The termination of a marriage contract is subject to the same requirements as its conclusion, i.e. the termination must be certified by a notary. After the dissolution of the marriage contract, the matrimonial property continues to be subject to the legal regime established by law. The marriage contract may also be amended by agreement of the spouses, certified by a notary. The legal regime of the property acquired before the modification or termination of the contract is not altered.
Thus, according to AVOCAD lawyer Rokas Puodžiūnas, a prenuptial agreement is not an expression of mistrust, but an excellent tool to balance the mutual property interests in a marriage. A large part of the disputes that arise (both in and out of marriage) are caused by monetary disagreements, so it is advisable to try to avoid the causes of such disputes.