As of 1 September 2018, the new Matrimonial Property Act is in force. The last substantial reform dated back to 1976, so an update was welcome. But what does this mean for your personal situation? Is your prenuptial agreement still valid and "up to date"? Do you need to reconsider your situation? Or can you just sit back and leave everything as it is? And if you are about to get married, what do you need to know?
The key innovations of the Act relate to three topics:
- The existing "statutory regime" has been maintained, and several refinements have been made to it. This regime is automatically applicable if no prenuptial agreement is signed.
- The "separation of property" regime has also been maintained, but the applicable legal framework has been upgraded. Furthermore, the spouses are now encouraged to add certain clauses to their agreement in order to enhance matrimonial solidarity.
- The position of the surviving spouse has been modified. The Act aims to connect the legal inheritance rights of the surviving spouse to those who are part of the core family. At the same time, it aims to offer greater freedom to "recomposed" families.
Refinements to the existing "statutory regime"
The statutory regime is still the safety net for partners who do not enter into a prenuptial agreement. This regime equates to separation of property with community of acquisitions. The professional income and all income generated by each spouse's own assets become common to both spouses (this remains unchanged). The same applies to the goods that are acquired during the marriage as well as savings that are created with this income during the marriage. By contrast, goods already acquired before the marriage or inherited or received as a gift during the marriage remain the spouse's own property. In short, the new act does not affect any of this.
Then what has changed as of 1 September 2018?
In the past, discussions arose on a regular basis about the property status of certain goods which had a certain connection with one of the spouses, such as clientele, shares, professional goods, and also individual life insurance policies, certain types of damages and severance packages.
The legislator has tried to clarify this issue. Thus, the Act stipulates when such goods are considered as common to both spouses or the property of one spouse. And the Act also determines the cases in which financial compensation to the matrimonial communal estate is due (if a good is considered to be the sole property of one of the spouses).
We will only highlight here the system for clientele, professional goods and shares. For these goods, the Act introduces a separation between the title of ownership on the one hand and the asset value on the other:
- The right to clientele is the personal property of the professionally active spouse, whereas the asset value of the clientele is included in the marital community estate, if this asset can be traded in a commercial context. An exception applies when both spouses exercise the profession together or when both of them operate the company, in which case the clientele will be common property.
- As for professional goods that are exclusively used to exercise a profession or to manage a company owned by one of the spouses, the ownership of these goods will be the exclusive right of that spouse, whereas the asset value will be considered common to both spouses. If the couple divorces, the spouse using these goods for the exercise of his/her profession can be certain that he/she will be able to keep on using these goods in the future, to sell them, etc. However, in the case of mixed use of such goods (for professional and also purely personal purposes), this rule will not apply. In such cases, the right to the goods will be common to both spouses, if they were financed with money originating from the matrimonial communal estate.
- Finally, the new system of "title and finance" concerning shares does not apply to all shares. It only applies to the following:
- Shares of companies that cannot be transferred freely, irrespective of the origin of the transfer restriction (legal, statutory or through shareholders agreements); and
- Shares of companies in which only the spouse-shareholder exercises his/her professional activity as director.
These shares must have been acquired with money originating from the matrimonial communal estate, but registered in the name of one spouse.
If all of these conditions are met, the membership rights of the shares are the sole property of the spouse in whose name they are registered. Their asset value, however, is part of the matrimonial communal estate.
Another innovation is that the relevant estimation moment has now been determined for all these goods. Only the date on which the marriage is dissolved (by divorce or death) is relevant, whereas, under the old act, it was the date of the partitioning of the property between the spouses. This new rule prevents the parties from manipulating the value of the goods, and it also protects the working spouse who managed to increase their value after the dissolution of the marriage as a result of his/her continuing efforts.
Finally, another new equitable rule has been introduced with regard to professionally held shares. It is inspired by the principle of "piercing the corporate veil". The legislator wanted to alleviate the adverse consequences of an overzealous reservation of profits within a professional company. The spouse-shareholder, who – as holder of the membership rights – exercises the right to vote, can decide whether or not to distribute dividends. If he decides to reserve the profits in a disproportionate way (e.g. in order to prevent this money from falling within the matrimonial communal estate), he will owe compensation to the matrimonial communal estate (in the event of a divorce, for instance). Otherwise, the spouse who had no say in the operation of the company would face the threat of unfair treatment. In most cases a debate will arise, as well as issues regarding evidence. In order to successfully claim compensation, one must prove that the matrimonial communal estate could have "reasonably received this money if the profession had not been exercised within the structure of a company". As a defence against such a claim, the spouse-shareholder could argue, for example, that the distribution of profits was not possible or was inopportune, because the company needed to invest the profits in order to guarantee its continuing existence or survival. From a practical point of view, one can expect that this debate will often require the intervention of external experts, resulting in the downside of such expert investigation in terms of duration and cost.
Optional correction mechanisms for the "separation of property" regime
The separation of property regime has been maintained under the new legislation. The idea of abolishing the pure separation of property was abandoned, but several rules have been created in order to encourage the future spouses to carefully consider their choice of this regime and to provide for a minimum of solidarity between them.
So what are the new features?
First, several rules which were "typical" for communal estate regimes have been extended to situations of joint ownership, which often come into existence within a system of separation of property. This entails legitimate modernisation, e.g. with regard to the rules on matrimonial benefits, the preferential allocation of goods such as the family residence, and the legal concept of "fencing". Fencing means that one of the spouses either conceals information or makes false statements about the composition or size of the community or joint ownership in order to obtain a personal advantage to the detriment of the other spouse. Even though the law already explicitly sanctioned the fencing of goods belonging to the matrimonial communal estate, such a rule did not exist for goods held in joint ownership. This unequal treatment has now been remedied.
Secondly, the Act offers an explicit basis for various conventional clauses which are already frequently used in practice by notaries and attorneys. This is the case, for example, for clauses concerning the evidence between spouses of their exclusive ownership, proof of claims, terms governing joint ownership and special-purpose property between the spouses, as well as the "settlement of acquisitions" clause. This clause requires that, at the end of the matrimonial regime (following divorce or death), the spouses compare the respective acquisitions and savings they have realised during their marriage. The spouse who has least enriched himself/herself can then file a claim against the other spouse, within three years of cognisance of the dissolution of the marriage (and within a maximum of 10 years after the dissolution).
Such "settlement of acquisitions" clauses have often been recommended over the last ten to fifteen years to maximise the rights of the surviving spouse from both a tax law and a civil law angle. The tax benefit was, however, recently abolished by the Flemish Decree of 8 December 2017 (applicable to successions opened as of 24 December 2017), and without prejudice to the outcome of a case still pending before the Constitutional Court (in which the annulment of the Decree is at stake). Regardless of the outcome of that case, it must be stressed that the loss of the tax benefit leaves the civil-law advantages of such clauses unharmed. This is due to the fact that "matrimonial benefits" between spouses are not considered as gifts or donations: in other words, from the perspective of inheritance law, such benefits are not subject to curtailment (if they respect the limits laid down for that purpose by Belgian inheritance law).
All these possible clauses are purely optional. If the spouses want a regime with pure separation of property, without any settlement of acquisitions, then this is still quite possible. However, the notary appointed to draft the prenuptial agreement will be obliged to inform the future spouses of all the legal implications of such a settlement clause (or the absence thereof). The notary is also obliged to state explicitly in the prenuptial agreement that he has fulfilled this duty of duly advising the spouses.
Finally, a third innovation is the possibility of a "judicial equity correction" clause which also has to be mentioned in the prenuptial agreement. Such a clause can be very useful in ensuring a better balance and a minimum of solidarity between spouses who decide to marry under a pure separation of property regime. However, this clause is also purely optional. Nonetheless, the (future) spouses will not be able to enter into such a prenuptial agreement if they do not explicitly state their choice for or against such a clause. Again, the notary in charge of passing the agreement has an explicit legal duty to advise the future spouses, and he is also legally obliged to state explicitly which choice the spouses have declared regarding such a clause. If he fails to do so, he can be held professionally liable. Therefore, an opt-in or opt-out is required in the agreement. This means that the notary will have to refuse to draft and sign the prenuptial agreement if the spouses disagree about the inclusion or exclusion of the "judicial equity correction" clause.
In order to allow the spouses to make such a choice, it is, of course, necessary that they understand its impact and the conditions of the judicial equity correction. The legal conditions for this are quite strict. In essence, the Act envisages the situation of a divorce on the grounds of irreparable breakdown, in which the dissolution of the separation of property regime will lead to "manifest undue hardship". In this case, the family court can grant compensation at the request of the disadvantaged spouse which is payable by the other spouse. It is important to keep in mind that the Act only seeks to correct harrowing situations and hence requires that (1) after the divorce, one of the spouses must suddenly end up in a very weak position because he/she has no share whatsoever in the wealth accumulated by the other spouse due to the separation of property regime, and (2) the circumstances since the conclusion of the prenuptial agreement have changed in an unforeseeable and unfavourable way (such as the loss of or a reduction in professional income following an accident, an illness or a situation in which the spouses have to move abroad for the sake of one of their careers).
Given these conditions, it is clear that this innovation does not provide a blank cheque that will protect the financially weaker spouse at all times. Empowerment remains essential, as was also the case during the legal reform of our divorce law in 2007.
Finally, there is also a cap on the size of the possible judicial equity correction. The remuneration granted by the judge will amount to a maximum of one-third of the net value of the combined gains/acquisitions of the spouses (at the time of dissolution of the marriage) minus the net value of the personal gains/acquisitions of the financially weaker spouse.
The position of the surviving spouse
In order to determine the legal inheritance rights of the surviving spouse, we no longer have to distinguish between couples married under the statutory regime and those married under the separation of property regime. If there is no will and the couple have no descendants, the surviving spouse will inherit:
Under a communal estate regime: full ownership of the matrimonial communal estate as well as the usufruct of the deceased spouse's own property (this was already the case under the old law). The bare ownership of that property is passed on to the deceased spouse's parents/grandparents or brothers/sisters/their descendants).
Under a separation of property regime: full ownership of the deceased spouse's share of the property held in exclusive joint ownership with the surviving spouse (this is new) and the usufruct of the deceased spouse's own property (this was already the case). The bare ownership of that property is passed on to his/her parents/grandparents or to his/her brothers/sisters/their descendants.
Another new feature is the fact that fourth-degree relatives (uncles, aunts and their descendants) no longer inherit when they are in competition with a surviving spouse. Such inheritance rights for distant (non-privileged) relatives no longer reflected the desires of our modern society.
Finally, the act also offers greater freedom to couples who already have children from a former marriage or relationship and who wish to get married or to remarry. As of 1 September 2018, such couples can agree in their prenuptial agreement that the surviving spouse will have no legal inheritance rights whatsoever, not even with regard to the family residence or its contents. Under the former law, such "Valkeniers clauses" were only possible for other assets. The statutory minimum reserve for the surviving spouse was the usufruct of the family residence as well as its contents (household goods, furniture, etc.), and this was untouchable under the old act. This has now been changed, giving future spouses in such a situation a great deal more freedom. This is especially interesting for "recomposed" families. The only minimum which the Act stipulates for the surviving spouse is the right to stay in the family residence for six months after the death of the other spouse. This time frame allows the surviving spouse to move to another place or to come to an agreement with the heirs of his/her former spouse.
Entry into force
The rules concerning the entry into force of the new provisions are set out at length in the Act. The key details are as follows:
- For couples who married before 1 September 2018, the existing prenuptial agreements remain valid.
- For couples who married before 1 September 2018 without a prenuptial agreement, the new "statutory regime" refinements with regard to the ownership rights for certain goods (such as clientele, professional goods, shares in a professional corporation, individual life insurance policies, severance packages and certain types of damages) will only apply to goods obtained as from 1 September 2018 and acts performed as from 1 September 2018. It is therefore perfectly possible that, in a subsequent dissolution of the matrimonial community by divorce or death, both the old and the new rules will apply, depending on when the assets were actually acquired.
- For couples who get married on or after 1 September 2018, the new rules concerning the reform of matrimonial property will, of course, apply in their entirety.
- For couples who decide to change their prenuptial agreement on or after 1 September 2018, where the contract was originally concluded before 1 September 2018, the new rules concerning the reform of matrimonial property will apply, if such modification leads to the dissolution of the existing matrimonial regime.
- For couples who are already involved in divorce proceedings which were still pending on 1 September 2018, the new rules for reform of matrimonial property will not apply, given the retroactive effect of the petition for divorce.
Finally, the new rules that affect the field of inheritance law (such as the innovations concerning the inheritance rights of the surviving spouse, the more broadly permitted "Valkeniers clauses" and fencing) will only apply to successions opened as from 1 September 2018.
Your existing prenuptial agreement remains valid, but the new Act will possibly lead to refinements in certain respects. It is always advisable to have your prenuptial agreement re-evaluated from time to time, taking into account your life course, wealth accumulation and personal/matrimonial endeavours. The prenuptial agreement is, after all, an essential part of your estate planning.