Love and Finance: Marriage Contract + Divorce
In Switzerland, divorce rates are just over 40%, with couples calling it quits after 15 years on average. This was the exact statistic for my divorce.
In addition, we also didn’t have a marriage contract because we got married quite young, in line with the 95% of marriages that do not involve a contract either, according to Piguet Galland. These statistics are quite sobering.
If I were to get married again, I would most definitely only do so with a marriage contract. Of course, it may seem completely unromantic to consider the end of a relationship when one is in the midst of a loving and passionate one.
Consider this:
Without a marriage contract, the default agreement for married couples is that assets acquired after the marriage are jointly owned, whereas for a registered partnership (Eingetragene Partnerschaft, for same sex couples), it is that each person maintains a separate estate.
In the default agreement (property jointly acquired, Gütertrennung), agreement, the spouses keep those items in their possession before they got married as well as those that they inherit, but they share equally in the ownership of items acquired during the marriage. Any debts remain with the individual debtor. Under a “separate estates” agreement, there is no joint ownership of property.
Further, your occupational and individual retirement accounts are also partially affected by a marriage contract or agreement upon divorce. For example, under the “property jointly acquired” agreement, third-pillar assets are shared equally. Under the “separate estates” agreement, each person keeps his or her third-pillar assets. However, your occupational assets accumulated during the marriage are shared equally. This is applicable regardless of the marital property agreement you may have chosen.
If you have a mortgage together, this can complicate things even further. If you bought the property jointly, the party that moves out must receive compensation. The payment depends on the present value of the property.
The property may also be divided according to the marital property agreement with each spouse being entitled to the proportion that he or she contributed at the time of purchase (and this includes rights to any capital gain). It is therefore very important to record who paid what for your home and how. BCV asserts, that one complication that can arise is when one or both spouses used part of their occupational pension for the down payment.
According to Swisslife, if the joint mortgage hasn’t been paid off yet (which is often the case in Switzerland), both spouses are jointly liable, even if one of them has moved out. In other words, each of the divorced parties is liable for the other party’s debt if he/she is unable to pay. The mortgage agreement thus remains in place despite the divorce. While it is possible to get out of a mortgage, this often involves a high early repayment penalty.
Before you get married, consider sitting down with your future spouse and going over the above points and discuss how you guys would split your assets in in case of divorce.
Divorce brings about emotions and stress — if you’re considering divorce, I urge you to consult your financial consultant and/or a divorce lawyer so you can make the right choices to ensure that you’re limiting the negative financial impact on your wealth and protecting your indivisible property. If you need a listening ear, feel free to contact me.
For an article about how marriage might be a massively underestimated financial risk, check out my friend finanzuhu.ch’s article.
https://www.bcv.ch/en/Private-Banking/Life-events/Getting-a-divorce
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Originally published at https://www.loveandfinance.ch on February 13, 2021.
