Did you know that you can also amend your prenuptial agreement whilst you’re married?
In your prenuptial agreement, you set out the arrangements you have made with your partner for the duration of the marriage. You also set out arrangements in the event that the marriage ends due to divorce or death.
What not everyone realises is that a prenuptial agreement can have significant tax implications. We wrote about this previously, for example: Minimise the income tax payable after death).
It’s therefore important to take a look at your prenuptial agreement every now and then to check whether it still reflects your wishes.
Broadly speaking, a number of different forms of marriage can be distinguished:
- community of property
- married after 1 January 2018
- final set-off clause
- periodic set-off clause
Married under the community of property regime
Did you get married before 1 January 2018 and did you not visit a notary beforehand? If so, you are automatically married under the regime of full community of property.
This means that all your and your partner’s assets and liabilities are held in joint ownership. In the event of a divorce, all assets are divided 50/50. Should one of the spouses die, inheritance tax must be paid on half of the total assets.
Married after 1 January 2018
Different legal rules apply to marriages entered into after 1 January 2018. The legislature took the view that the regime of universal community of property did not properly reflect the wishes of society. The most significant change is that not all assets and liabilities automatically become joint property. Anything that each spouse already owns at the start of the marriage remains their separate property. Assets that are already jointly owned by both spouses do, however, form part of the matrimonial community. In addition, gifts and inheritances form part of the private assets of the person receiving the gift or inheritance.
Would you still prefer to share everything? You can! You can stipulate in your prenuptial agreement that all assets are to be held jointly, as was the case before 1 January 2018.
Married with a final set-off clause
Many married couples visit a solicitor before their wedding to set out various arrangements in their prenuptial agreement. We often come across a final settlement clause in such agreements. This clause stipulates that assets are to be divided at the end of the marriage as if this is a case of community of property.
The final settlement clause therefore appears very similar to a community of property arrangement, but it is not. An important difference is that you do not actually have to share all your possessions. You are simply required to compensate the less wealthy spouse for their value.
Suppose one spouse owns a property worth 100 and the other spouse has no assets. Upon the dissolution of the marriage, the spouse with fewer assets is entitled to a claim of 50 against the spouse with more assets, but does not therefore receive half of the property. The wealth of the wealthier spouse then consists of the property, valued at 100, minus a debt of 50 owed to the less wealthy spouse. After the settlement, both spouses have assets of 50.
The final settlement clause may be agreed only in the event of the termination of the marriage due to the death of one of the spouses
Married under the exclusion of cold
If you are married under the ‘cold exclusion’ provision, you and your partner have stipulated in your prenuptial agreement that you do not share any assets with one another. It may be agreed that any income not spent during a given year is to be shared between you. This is known as a periodic settlement clause. After a number of years of marriage, it is, of course, possible that you might wish to share a little more with your spouse. In that case, it is possible to amend the marriage contract and, for example, include a final settlement clause.
Mapping
What does your prenuptial agreement say? Perhaps you haven’t drawn up a prenuptial agreement with your partner at all, or perhaps it’s been gathering dust in a cupboard for years. Are you curious about the (tax) implications of your marriage? We’d be happy to help you work this out.