Prenuptial agreement and real estate: Why a prenuptial agreement makes sense

Around one in three marriages in Germany ends in divorce. But what happens to the family home when married couples separate? If there is no prenuptial agreement with agreed separation of property, the legally stipulated equalization of gains takes place and the assets earned by both partners during the marriage are divided. This can lead to major disputes in the event of divorce. Nevertheless, many couples shy away from bringing up the subject of a prenuptial agreement and a house - either because they are afraid of hurting their partner or because dealing with a possible divorce is perceived as unpleasant. The fact is, however, that a cleverly drafted prenuptial agreement can regulate many consequences of a separation and prevent the divorce from ending in a financial fiasco.

In our blog article we will enlighten you about reasons, possible hurdles as well as formalities of the prenuptial agreement for real estate.

When you should conclude a prenuptial agreement

In a prenuptial agreement, real estate ownership as well as other property aspects are neatly and clearly regulated. Married couples who find themselves in one of the following situations in particular benefit from the agreement:

The spouses have different amounts of assets: a prenuptial agreement prevents the partner with the greater assets from losing a large part of them to the spouse.

One spouse is an entrepreneur
In the event of divorce without a prenuptial agreement, the other partner would benefit from the business assets.

The couple has no desire to have children and is firmly anchored in their professional lives
To avoid unpleasant consequences of a divorce, financially independent partners should consider a settlement through a prenuptial agreement.

So as soon as one spouse would be financially disadvantaged in the event of divorce, it makes sense to have a prenuptial agreement covering the house and assets. This allows you to determine, for example, what will happen to the property in the event of separation.

Please note: A prenuptial agreement is usually drawn up by a lawyer and only becomes valid after it has been notarized. Therefore, the conclusion of a prenuptial agreement quickly incurs costs in the four-digit range, which should be planned for by the spouses.

Subsequent conclusion of a marriage contract

As a rule, a prenuptial agreement is drawn up before marriage. Nevertheless, married couples have the possibility to conclude a corresponding agreement during the marriage or even shortly before the separation. Only if the separation has already taken place, the prenuptial agreement can no longer be concluded. The so-called separation agreement is considered a special form of prenuptial agreement: it is concluded during the separation year if the spouses refrain from a divorce in the near future. Typically, legal as well as financial aspects are regulated by a clear agreement in the agreement.

Tip

Every individual case is different. Therefore, we recommend that you take advantage of a detailed consultation on the subject of prenuptial agreements and the house.

Prenuptial agreement and real estate: what the prenuptial agreement regulates

If divorce is unavoidable, the joint property often becomes the number one topic of dispute. In a prenuptial agreement, the house can be removed from the usually disadvantageous equalization of gains. The possible questions that the contract answers include:

Who owns the property?

The owner of a property is the person entered in the land register. In many cases, this is both spouses. However, it also happens that one partner acts as sole owner. The ownership of the real estate should also be recorded in a prenuptial agreement.

What happens to the joint property after the divorce is finalized?

After a separation, many partners feel the desire to sell the joint house. The transfer to one of the two spouses would also be conceivable. The prenuptial agreement for the house specifies the whereabouts in a binding manner and avoids disputes during the divorce proceedings. For example, it can be decided that the wealthier spouse will keep the property and pay a monthly settlement to the partner who has moved out.

Does a partner receive the right of residence?

In a prenuptial agreement for the house, it can be stipulated that one spouse will receive future housing rights in the event of divorce. For the duration of the right of residence, the property may not be sold. It is important that the contract specifies who will bear the costs of maintenance and upkeep of the property.

Who is responsible for current home loans after separation or divorce?

In principle, each co-owner must pay off the loan for the mortgage. However, in a real estate marriage contract, the partners can make other arrangements that better suit their situation.

Possible hurdles of a prenuptial agreement

Drafting a prenuptial agreement for the property offers a lot of relief in the event of a divorce. However, such an agreement is also accompanied by pitfalls, the following examples:

Both spouses are co-owners of the property
If one spouse brings the house into the marriage and also has his or her partner entered in the land register, this can prove disadvantageous - because the sole claim to the house lapses in the event of divorce.

Separation of property is waived in the prenuptial agreement
With the separation of property, spouses ensure that the assets remain separate. If this point is not taken into account in the prenuptial agreement, the marriage falls into community of accrued gains according to the law - this means that all assets gained during the marriage, i.e. including a real estate purchase, are distributed equally upon divorce.

Payments for conversions
Imagine the following scenario: One spouse is the sole owner of a property. The other partner and his or her parents invest money in renovating the house. If it was stipulated in the prenuptial agreement that the parents' gift only applies to their own child, the owner must repay the invested money upon divorce.

Conclusion: prenuptial agreement for the joint house as a precaution for the divorce case

Nobody likes to think about a divorce. Nevertheless, drawing up a prenuptial agreement often brings advantages - especially when owning a joint property. As experienced real estate agents, we at Isar Estate are familiar with the hurdles couples face with regard to a prenuptial agreement for the house. No matter if you want to draw up a contract as a precaution or if you are already in the process of divorce: We can help you with all your questions with our network.

We at Isar Estate are happy to assist you with our network. Contact us now if you need assistance in preparing a prenuptial agreement.

+49 (0) 89 901 697 46

info@isarestate.de

Disclaimer

Despite careful research and checking of the sources, the author assumes no liability for the accuracy and completeness of the information presented. In case of unclear legal and tax questions, it is advisable to consult a lawyer and/or tax advisor for clarification.

Author: Dipl.-Kfm. Christian Dürr

Image credit: Adobe stock photos, 35124377, johannesspreter