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Getting married, but do not know which matrimonial property regime to choose?

Once the wedding day is in place, future spouses will need to decide, in addition to the party venue, catering and band, which matrimonial property regime will apply to their marriage. The choice has to be made when filling in the marriage application. Which regime to choose and how is the family home protected in different property regimes?

The Estonian Family Law Act gives an option to choose between three matrimonial property regimes  - jointness of property (joint property), separateness of property and set-off of assets increment. If the spouses do not choose a property regime with the marriage application, the jointness of property regime is applied by default from the date of entry into a marriage. The spouses can change the matrimonial property regime during the marriage with a notarised marital property contract. 

In the case of a joint property regime, all things acquired during the marriage belong equally to both spouses, regardless of which spouse bought the particular thing or uses it. The joint assets include the funds in the accounts of both spouses, including salary, depositis, securities. If the spouses buy during the marriage housing, it belongs to both spouses jointly. This means that the family housing can be disposed - rented out or sold - only with the consent of both spouses. 

In the jointness of property regime, joint property forms even when only one spouse takes out a loan or pays the mortgage. The fact that the loan repayments are debited from the bank account of one spouse does not affect the joint ownership of the dwelling.

Items acquired by either spouse before marriage are not included in joint property. Objects acquired by the spouse during the marriage by disposal without charge, including as a gift or by succession (inheritance) are also not included in joint property. These assets are part of the separate assets of the respective spouse. With a separate property, a spouse can make transactions without the other spouse's consent.

In practice, it is quite common for spouses not to buy a home during the marriage, but instead to live in a dwelling that belongs to one of the spouses as a separate asset. In this case, how is the family's home protected and does one spouse have the right to sell the family home at will?

Pursuant to § 27¹ (2) of the Estonian Family Law Act,  a spouse may dispose of or undertake to dispose of a dwelling which is the spouse's separate property and is used as a housing of the family or used separately by the spouse who is not the owner and grant the use thereof to a third party or terminate the legal relationship on which the use thereof is based, only with the consent of the other spouse.

In a matrimonial relationship, the protection of the family home does not therefore depend on whether the property is owned jointly by spouses or whether it is a separate property of one of the spouses. A spouse may not sell a family home without the consent of the other spouse. The consent of the spouse is also required for the housing belonging to the other spouse to give the housing into the use of a third person or to terminate such legal relationship.

In the event of a divorce, the joint property is divided equally between the spouses.

In the case of separateness of property, joint property is not formed by default during the marriage. Each spouse is the owner of his or her property. However, the spouses may acquire joint ownership by agreement. For example, buy a family home together. Similar to the joint property regime, a spouse can only sell or rent out a family home with the consent of the other spouse, not dependant on whether the family home is separate or joint property.

In the event of a divorce, each spouse remains the owner of his or her own property.

Set-off of assets increment regime is probably the least used type of matrimonial property regime in practice. In the case of set-off of an increase in assets, the spouses do not have joint property. Each spouse remains the owner of the property which he or she owned before the marriage or which he or she acquired during the marriage. The creation of joint ownership is possible only on the basis of a separate agreement.

In the event of divorce or termination of the property relationship for any other reason, the part of the assets of each spouse added during the property regime lasted shall be set off between the spouses. A spouse whose assets have increased to a lesser extent during the marriage has a claim against the other spouse.

For example, John owned a limited company before getting married and the value of the company was at the time of entry into marriage €20,000. Mary did not own anything at the time of entry into marriage. During the marriage, Mary stayed home with the kids. After 5 years, the relationship was on the rocks and John and Mary decided to get a divorce. At the time of divorce, the value of the company owned by John had increased to €100,000 and Mary still did not have any assets. As the value of the company John owned had increased by €80,000 during the marriage, Mary now has a claim against John in the amount of €40,000 ((€80,000-€0)/2). 

Irrespective of whether the family home belongs to one spouse or the home is acquired jointly, the spouse has no right to dispose of the family home during the marriage without the consent of the other spouse.

In summary, under current Estonian law, the family's common housing is protected in all matrimonial property regimes. Which matrimonial property regime to choose when getting married depends on whether the spouses wish to create joint property and assets automatically or share the increase in the value of the assets during the marriage.

This article was originally published on August 18, 2021 in https://ajakiri.lastekaitseliit.ee/2021/08/18/abikaasade-varasuhete-liigid-ja-perekonna-uhise-eluaseme-kaitse/ 

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