Division of Assets and Property during Divorce Cases in Germany

If the spouses have not concluded an individual agreement by concluding a marriage contract (prenuptial agreement), the statutory matrimonial property regime of the community of accrued gains applies in Germany following legal requirements, see Section 1363 of the German Civil Code (BGB). This means that in the event of a divorce, the assets acquired during the marriage are equalised (equalisation of accrued gains). The equalisation of accrued gains ensures that both spouses benefit equally from increased assets acquired during the marriage. For this purpose, the gain of each spouse is calculated, i.e. the difference between the initial assets (the assets that each partner had at the beginning of the marriage) and the final assets (the assets that each partner has at the end of the marriage). The spouse with the higher gain must give half of the difference to the other spouse.

Marital assets within the meaning of the community of accrued gains comprise the entire assets of both spouses – monetary assets, real estate, share options and company assets. Debts, i.e. negative assets, are also included in the equalisation of accrued gains. The division of property, company assets and debts can be complicated and emotionally stressful. Certain assets are excluded from the equalisation of accrued gains. These include inheritances and gifts received by one spouse during the marriage and personal items that are not part of the joint household.

Another aspect to consider in a divorce in Germany is pension equalisation, particularly the fair division of pension entitlements. This should not be underestimated, as pension equalisation significantly impacts the financial situation of both spouses in old age.

A prenuptial agreement can often help to avoid complicated divorce settlements. This type of agreement is a safety net for a possible future situation. A professionally drafted prenuptial agreement essentially provides a contractual plan for the division of assets. If this plan is drawn up in the good years of the marriage, it can ensure that the assets in question are divided fairly. If the agreed marriage contract no longer meets your expectations, it is possible to amend or annul the marriage contract. If it becomes apparent during a divorce that some clauses or even the entire prenuptial agreement have been drawn up to the disadvantage of one of the spouses, the prenuptial agreement can also be contested.

Prenuptial agreements should always be drafted by an experienced family lawyer to ensure that fair clauses consider the wishes of both spouses.

Several factors play an essential role in the division of assets. On the one hand, a prenuptial agreement concluded in advance can avoid future points of conflict and define appropriate solutions for the division of assets. In addition, a prenuptial agreement can ensure that the assets are divided according to the spouses’ wishes in the event of a divorce to prevent unnecessary complications. Alternatively, the spouses can sit down with their respective lawyers to reach a mutually agreed division of assets. In court, the assets are then divided equally between the two parties. These measures relate to the assets that the spouses own jointly. This means assets acquired jointly during the marriage, via a joint bank account, or via contracts signed by both partners.

An example of this is the purchase of a car. If a vehicle is bought and paid for by one spouse, it is considered their car and is, therefore, not a joint asset. This also applies if the other spouse uses the vehicle for work or other purposes. It is not considered their asset if they have not paid for the car or are not registered as the owner. This means this car is not one of the assets that must be divided in the divorce. The sole owner is responsible if repayments have to be made for the vehicle.

According to Section 1357 BGB, it is permissible for spouses to enter transactions to ‘meet the living needs of the family’, even if they involve binding the other spouse. Such transactions concern matters relating to the family’s necessities (for example, household appliances, food, etc., deemed necessary).

The division of property depends on who the actual owner is. In some cases, the spouses have acquired property before the marriage, for example, through inheritance or purchase. If the other spouse has not contributed to the financing of the property, it is usually not considered divisible in the divorce, as this would not be an equitable solution for dealing with the assets.

In the case of loans to finance the family home, it often depends on who is contractually obliged to repay the mortgage to the bank. The person who signed the contract is considered liable in Germany. The family home is often jointly owned, and repayment may be made from a joint bank account. The spouses should, therefore, agree on how to arrange this loan repayment. For example, it may be decided that one spouse will compensate the other for taking complete control of the loan repayments and, therefore, the property itself. However, such an agreement should not lead to the spouse in question (intentionally) taking on payments that exceed what they can finance. This can be seen as immoral, especially if pressure has been exerted to take over the payments.

It becomes challenging when a decision regarding the former shared marital home must be made. While the problems or division of other properties (rental properties) that are jointly owned can often be solved more easily through financial arrangements, the marital home can pose a considerable challenge. Our German family lawyers will advise you at the beginning of your marriage to work out solutions to such a problem as a precaution. Other options include

• Selling the property: This option can be used for a clean break and allows for an equitable distribution of incoming funds based on the amount invested in the property. Selling a property can be a lengthy process. However, a quick sale often results in selling the property for less than its value. If the sale of a joint property is being considered, this should be declared during the year of separation before the official divorce.
• Buyout or payment to the spouse: Another option is to buy the property from the spouse. This solution is particularly suitable if one of the spouses wishes to continue living in the property and a reasonable price is agreed upon. To ensure this is an official purchase and complies with German law, the spouses should seek advice from a lawyer and the bank. Such a purchase can involve a complicated procedure. Advice from a qualified lawyer can ensure that the spouse who is paid out is no longer liable for the property.
• Actual division of assets: Although the option of actual division of assets is available to both spouses, it is often not utilised. In this procedure, the property is divided into two separate properties (two residential units). In practice, this is not practical as the property in question must be suitable for conversion and a high degree of cooperation is required between the spouses – to the point where they are essentially living next door to each other until they can sell the properties.
• Transferring the property to the children: Another option is for one of the spouses (or both) to transfer their share of the property to their children. In this case, the property can remain in the family during the division of assets. This is particularly appropriate if the house has a high sentimental value. If you wish to take advantage of this option, you should be aware that you will need your spouse’s consent to carry out the transaction. In addition, property can give rise to certain liabilities, taxes, and other problems, which must be communicated to the children concerned in advance.