April 12, 2011
Pre-nuptial agreement: Should you or should you not?
When Jessica Simpson married Nick Lachey, a pre-nuptial agreement was the farthest from her mind, understandably because at the time, Lachey was earning more than she was. When the two broke up, the tables have turned and Lachey walked away $10 million richer. Britney Spears lost a fortune in the same way when she married childhood sweetheart Jason Alexander and divorced him 55 hours after their Las Vegas wedding.
In the Philippines, pre-nuptial agreements are not as popular as they are in the U.S. In fact, many couples often find it difficult to suggest a pre-nuptial agreement for fear that the other party might think they are doubting the other's intention or character. As a culture, we simply don't see pre-nuptial agreements as a fair protection, especially for the more affluent partner, mainly because we have a vague idea of what the law says about property relations.
In a nutshell, "property relations" refer to the set of rules that will govern the distribution of property once a marriage terminates. In the Philippine jurisdiction, this set of rules can be found in the Family Code, which superseded the Civil Code provisions on Marriage. Whether it is the Civil Code or the Family Code that is applicable to a couple depends on the date when the marriage was celebrated. Couples who were married before August 31, 1988—the date of effectivity of the Family Code—are covered by the Civil Code, while those who were married on or after said date are covered by the Family Code.
Why is this important to the topic of property relations? Article 74 of the Family Code provides: "The property relations between husband and wife shall be governed in the following order: (1) By marriage settlements executed before the marriage; (2) By the provisions of this Code; (3) By the local custom.
This means that in the absence of marriage settlements (also popularly referred to as pre-nuptial or ante-nuptial agreements), the default property relations as prescribed by law applies. The "default property relation" under the Civil Code is different from that in the Family Code. In the former, it is "conjugal partnership of gains" while in the latter, it is "absolute community of property." So if you were married during the effectivity of the Civil Code, and you did not execute a pre-nuptial agreement, the property relation that will govern you is conjugal partnership of gains. On the other hand, if you were married during the effectivity of the Family Code, without a pre-nuptial agreement, you are covered by absolute community of property.
There is a world of difference between the two. Under absolute community of property, the parties enter into the marriage, bringing into the common fund everything that they own at the time of the marriage. Any property that each of them may acquire during the subsistence of the marriage, with certain exceptions, are also contributed to this common fund. In fact, anything that they acquire during the marriage is considered as part of this absolute community unless it is proven to be among the exclusions. Once the marriage is terminated, the absolute community is divided equally between the parties, no matter which spouse was "richer" prior to the marriage.
On the other hand, under conjugal partnership of gains, the parties retain ownership of any property that that they may have acquired prior to the marriage. These form part of the spouses' exclusive property and do not go into the common fund. What goes into the common fund is only the income from the spouses' exclusive property, as well as whatever earnings the spouses may have from their labor and industry, and from the use of the common fund. Whatever the spouses may acquire during the marriage is also presumed to be conjugal unless the contrary is proved. Upon the dissolution of the marriage, only the conjugal property is divided between the spouses because they never lost ownership over their exclusive property.
The last property regime that the Family Code provides for is the complete separation of property. Under this regime, each spouse retains ownership and enjoyment of their own separate properties. Each spouse also gets to exclusively own whatever income they may derive from employment, business activities, or the practice of their profession, to the exclusion of the other spouse. In the same vein, each spouse shall also bear their own expenses. In effect, there is nothing to divide between the spouses upon the dissolution of the marriage.
Again, when it comes to property relations, the law puts a premium on the intention of the future spouses, so much so that the law does not intervene unless there is no marriage settlement between the parties prior to their marriage. In fact, the parties are free to decide which property regime should apply to them, and even to specify which types of properties should form part of their common fund, if they want to nit-pick.
While future spouses have the full freedom to fix their property regime via a pre-nuptial agreement, the law imposes certain formal requirements for this document to be valid: 1) it must be in writing; 2) it must be signed by the parties; and, 3) it must be executed before the celebration of the marriage. It also must not prejudice third parties (i.e., it must not impair the rights of any party other than the future spouses) unless the pre-nuptial agreement is registered in the local civil registry and the relevant property registries.
In sum, marriage itself is a major decision, especially since the options and remedies for the spouses are limited, in the event that the marriage doesn't turn out well. For couples who truly love each other, making sure that one—or both—is protected from the economic impact of a marriage gone bad should not be too much to ask.
If you have questions for Atty. Allen, email firstname.lastname@example.org.
Atty. Allen A. Liberato is head of Corporate Legal Affairs at strategic marketing communications firm TeamAsia. She earned her Bachelor's Degree from the University of the Philippines Diliman and her law education from the University of Perpetual Help under Dean Justice Isagani A. Cruz.