From general community of property to limited community of property

Law change as of Jan. 1, 2018

As of Jan. 1, 2018, the law has changed. The changes affect communities created after

January 1, 2018 were created. This is the case if persons married or entered into a registered partnership after January 1, 2018 without making prenuptial agreements. This may also be the case if persons who are already married changed their prenuptial agreements after January 1, 2018.

The following refers to a marriage; it also includes a registered partnership.

Total community of property

If you married before Jan. 1, 2018, without making prenuptial agreements, then you were married in a general community of property (also called the "legal" community of property, because this was the marital property system in the law).

The word "general" says it all: through marriage, all possessions you already had and would acquire became common. Everything fell into the community of property.

There were only two exceptions: inheritances and gifts to which the exclusion clause (private clause) was declared applicable and so-called "attached" property.

Exclusion clause

If the donor or testator does not want the gift or inheritance (or bequest) to fall into a community of property, the donor or testator can declare an exclusion clause applicable to the gift or inheritance. The gift or legacy then does not fall into the community of property of the person who receives a gift or inherits something, but becomes his or her private property. Even if that person would want the gift or inheritance to fall into the community of property, it does not. The will of the donor or testator takes precedence.

Connected assets

These goods are such that they are attached to a person and do not fall into a community of property. In case law, this term is used sparingly; not many assets are classified as "connected." An example of a verknocht property is a personal injury benefit.

Change

Before Jan. 1, 2018, if you did not want to marry in full community of property, you had to make prenuptial agreements.

One often hears the cry that after Jan. 1, 2018, you are "automatically married on prenuptial agreements."

Nothing could be further from the truth. The concept of community of property is being restricted: by law, after Jan. 1, 2018, for persons who have married or entered into a registered partnership or persons who have dissolved their prenuptial agreements, there is no longer a general community of property, but a limited community of property.

Note that for persons who have already married or entered into a registered partnership before

January 1, 2018 without making prenuptial agreements, nothing will change in their matrimonial property regime. For them, the general community of property remains in place and the "old" legal rules continue to apply for the most part.

Still, there are a few changes for those individuals who are already married. These are listed below.

Limited community of property

If you married after Jan. 1, 2018, without making prenuptial agreements, then you are married in a limited community of property.

What does this limited community of property mean?

In short, everything the spouses acquire during their marriage (assets and debts) falls into the limited community of property.

Not included in the community are:

• the private property and debts that a spouse owned when the marriage was entered into (assets);
• inheritances and gifts;
• connected assets.

Contributions

Property that you already had when you entered into the marriage does not fall into the limited community of property. Because this is the legal system as of January 1, 2018, you do not need to go to the notary beforehand to arrange this by making prenuptial agreements.

But here is immediately one of the weaknesses of the system: if at the end of the marriage (by death or divorce) you want to know -or have to prove- what you had at the beginning of the marriage, it is important to write it down at the beginning of the marriage. So that means: keep daily statements of your bank accounts as of the date of marriage throughout your marriage so that you can later prove what was in those accounts at the start of the marriage.

The same goes for a securities portfolio. But you will also need to make a record of the contents you have at that time, your debts (personal loans), business, shares in a B.V., house, car, boat, caravan, etc. The banks and tax authorities only keep your records for a limited time. If at the end of the marriage you want to have proof of what you had when you entered into the marriage, you will have to take care of that yourself.

The law says that if at the end of the marriage you can't work it out or can't prove whether a particular asset is private, that asset is deemed to be in community property.

Inheritances and gifts

Inheritances and gifts also do not fall into the limited community of property. Not only inheritances and gifts that you already had before entering into the marriage, but also inheritances and gifts that you obtain during the marriage. Therefore, it is no longer necessary for the person who makes a gift or leaves an inheritance to declare an exclusion clause applicable.

It is possible that the donor or legatee may want the inheritance or gift to fall within the community of property. If that is the case, the donor or testator will have to make a so-called "inclusion clause" so that the inheritance or donation does fall within the limited community of property.

The usefulness of an inclusion clause

You can make an inclusion clause because you like the spouse of the person to whom you donate or bequeath assets so much that you want the gift to fall into the community of property so that he or she can also benefit from the inheritance or gift.

Another reason may be a tax reason. If assets have become private through inheritance or gift, and the person who was gifted or inherited those assets dies, then those assets belong to his or her heirs.

Example:

Husband and wife have a limited community of property. They have two children.

The community of property is worth € 600,000.00. The husband has privately inherited € 450,000.00.

When the husband dies, € 300,000.00 of the community of property accrues to the wife (her half of the community). The remaining € 300,000.00 (the estate) is shared by the wife and the two children, i.e. € 100,000.00 each. The wife is entitled to (€ 300,000.00 + € 100,000.00 =)

€ 400,000.00 and each of the children to € 100,000.00.

The husband's private assets of € 450,000.00 are shared by the wife and the children:

€ 150,000.00 each.

The woman is entitled to a total of € 550,000.00 and each of the children to € 250,000.00. The children owe inheritance tax on this.

Had an inclusion clause been made, the community of property would consist of

€ 1.050.000,00. The wife would then be entitled to € 525,000.00 (her half of the community).

The remaining € 525,000.00 (the estate) is shared by the wife and the children: each

€ 175.000,00. In this case, the children owe inheritance tax on € 175,000.00 and not on

€ 250.000,00. The wife pays no inheritance tax because for her an amount of € 723,526.00 (rate 2023) is exempt from inheritance tax.

Thus, the inclusion clause can save inheritance tax.

What will change for couples/registered partners already married before January 1, 2018?

It was mentioned earlier that there are also changes for individuals who are already married.

One of the changes is the following.

Suppose you are married in community of property, and you have your own company or shares in a B.V. that is/are private. For example, because the company or shares were acquired with assets from an inheritance or gift to which the exclusion clause applied.

The company or shares will then not fall into the community.

Since January 1, 2018, that business owner or owner of the shares in the B.V. will have to pay "reasonable compensation" to the community for the knowledge, skills and labor that a spouse used for the benefit of the business. This rule took effect immediately on Jan. 1, 2018, including for pre-existing marriages. Thus, this must involve a business or shares in a B.V. that is/are private, while a community exists.

How large this compensation is, and how it should be calculated, is not yet entirely clear. Case law will need to flesh out this concept.

Importance of prenuptial agreements after January 1, 2018

If you get married after January 1, 2018, and want to deviate from the system of the limited community of property, you will need to make prenuptial agreements.

Prenuptial agreements are anyway "a must" for entrepreneurs or owners of shares in a B.V. whose company or shares are/are private (see what is mentioned above).

Similarly, prenuptial agreements are "a must" if you want to keep separate what you acquire or owe during the marriage (other than inheritances or gifts).

You may also want to maintain the relationship in which you bought a house.

Suppose you started living together and you bought a house of which one partner owns 60% and the other partner owns 40% because you each invested a different amount in it. You would think that in the limited community of property these shares in the house would remain private. However, that is not the case. The new law states that after marriage (after Jan. 1, 2018) you each become 50% entitled. This applies even if the ratio is 99%-1%. So if you want to keep your original share, you are required to make prenuptial agreements.

In conclusion

The legislature assumed that the change in the law after January 1, 2018 would mean that far fewer people would need to go to the notary to make prenuptial agreements. However, the opposite seems to be true.

A general advice: before you get married or enter into a registered partnership, always go to the notary first and get informed about how the law change will affect you personally.

Prevention is better than cure.