Divorce in Germany: Division of Assets and Property

One of the more difficult aspects of a divorce in Germany is the division of assets and property. The decision to get a divorce can lead to many questions concerning how this division is decided upon. On this page, we will provide some insight into how the division of assets occurs. Our lawyers advise on all areas of the divorce process in Germany.

If you are considering a divorce or are in the middle of divorce proceedings and would like to avail of the services of a family lawyer, then make sure to get in touch with Schlun & Elseven Rechtsanwälte. This page will provide an overview of how the division of assets in a divorce is regulated. However, it should not be considered as a replacement for legal advice. Contact our lawyers today for specialised and personalised guidance which considers the realities of your situation.

Our lawyers provide clients with support and legal representation through their divorce case.

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Division of Assets and Property: Nature of Assets

The assets divided following a divorce include the marital property, other properties if they have been acquired through joint accounts or signed for by both partners, pension plans, stock options, and other assets acquired during the marriage. Some assets acquired before the marriage may have gained value during the marriage. This can be reflected in the division of assets afterwards, as the added value may be divided between the spouses. Therefore, it’s clear that not all assets will be divided between the partners. Generally, these assets are those accumulated during the marriage and are the ones both partners have signed up for.

Similarly, the debts accrued during the marriage also must be examined in the event of a divorce. Like the division of assets, the liability for debts does not simply split 50 / 50 in the divorce; instead, the question concerns which spouses are contractually obliged as debtors. Should one of the spouses be the sole owner of a property or asset, they are liable for any debt. Similarly, where one of the spouses is contractually obliged to finance a deficit in most cases, they will be the ones to repay it. It will not be considered a joint liability if not signed by both spouses and if it’s not to the benefit of both spouses.

Specific contractual arrangements can be seen as “unfair” depending on their circumstances. This mainly plays a role where the loan (which is being paid for by both spouses) is exclusively for the benefit of just one spouse.

Another aspect to be aware of regarding divorce is pension rights equalisation. Beneficial pension schemes can be determined as assets, but instead of going into detail about them here, we would advise you to visit our page on the issue for a clearer picture.

The Division of Property: The Marital Home

The division of property is a complex process, and this can especially be the case when it involves the decision regarding the marital home. Whereas the spouses’ issues concerning other properties (rental properties) co-owned may be easier to resolve through financial settlements, the marital home can be a more complex problem to fix. Discussing the issue with a family lawyer at the start of the marriage can lead to a proactive solution that the spouses can agree. However, should that not be on offer, here are some ways in which a solution can be found:

• Sell the Property: This solution will not be the best choice in many situations, but it is a potential resolution. This option is available; it can be pursued for a clean break and allow for a fair distribution of the incoming finances based on the amount invested in the property. However, it should be noted that the sale of a house can be a lengthy process and that a quick sale of one can lead to the property being sold for less than it is truly worth. If this option is considered, then the spouses may be best advised to approach it during their year of separation before the official divorce. Once again, having time to sell the property will ensure that a better price is reached when the divorce itself is finalised.
• Buyout / Paying the other Spouse: Another option available is that one spouse buys out the property from the other spouse. This solution can be a fair one where one of the spouses is determined to stay in the property, and a reasonable price is decided upon between the spouses. To make this an official purchase, the spouses should consult with a lawyer and from there with their bank. This can be a complicated process and will ensure that the spouse who has been bought out has their liability for the property removed.
• Actual Division of the Property: Theoretically, this is an option available to spouses, but in most cases, this does not happen. This process involves dividing the property into two separate properties (two residential units), which the parties can then decide what they do with them. In practice, this is impractical for most cases as the property in question has to be suitable for conversion, and it involves a high degree of cooperation between the spouses – to the level where they essentially live next to each other until they can sell said properties.
• Transfer Ownership to Children: Another option available to the divorcing couple is for one (or both) of the spouses to transfer their share of the property to their children. This type of scenario allows the property to be kept within the family during the division of assets. It is particularly appropriate where the house has a substantial sentimental value. Should one of the spouses seek to carry this out, they should be aware that they may require the other spouse’s permission to carry out the transaction. Houses can also carry certain liabilities, taxes and other issues, so this would need to be outlined to the children in question in advance.

Another option available is to have the issue resolved and planned for in the prenuptial agreement.

The Division of Property: Loan Repayments and Other Properties

The division of other properties will be based on who is the property’s actual owner. Sometimes partners entering a marriage may have acquired property before the marriage. This property may have come about due to inheritance or having purchased it before the marriage. Where the other spouse has not contributed to the property’s financing, it is not likely to be considered divisible during the divorce. This would not be an equitable solution to how the property should be handled.

When it comes to loans for financing the family home, it can come down to who is contractually obliged to repay the bank for the mortgage. The person who signed the contract will be seen as liable. In many cases, the family house is down as joint property, and they may be repaying it from a joint bank account. Once again, should this occur, the spouses should reach some agreement concerning how to make this arrangement. For example, it may be arrangeable for one spouse to compensate the other to take complete control of the loans’ repayment and thus the property itself. However, it must be noted that such an arrangement should not (by design) cause the spouse in question to take on payments above what they can finance. This can be viewed as immoral, mainly when there has been pressure to take on the burden of these payments.

The Division of Assets

When it comes to the division of assets, several factors play a role. Firstly, having a prenuptial agreement arranged in advance may be fair to resolve the division of assets. Such a marriage contract can ensure that the assets are divided according to the spouses’ wishes before the complication of divorce plays a role. Alternatively, the spouses can sit down with their respective lawyers and decide to divide the assets. In court, the assets will be divided equally between both partners. These measures refer to assets that the spouses jointly own. Such assets include those purchased throughout the marriage or which have been purchased using a joint bank account / have contracts signed by both partners etc.

One example we can use is the purchase of a car. If a vehicle has been purchased and paid for by one spouse, then that car is their car and thus not a joint asset. This holds accurate even where the other spouse may use the vehicle for work or other purposes. If they have not paid for the asset or are not registered as the owner, it is not their asset. This means that this car will not be included in the assets that need to be divided in the divorce. Similarly, if there are repayments to be made on the vehicle, the sole owner is responsible for making them.

It is permissible under § 1357 BGB for spouses to enter transactions to “provide the necessities of life of the family”, even if they involve binding the other spouse. Such transactions concern issues that affect the family’s living requirements (necessary household appliances, foodstuffs etc., that are deemed necessary).

The Division of Assets: Unethical Joint Liability

Agreements signed during a marriage are not as straightforward as those signed by business partners. It is not unusual for spouses to sign up to arrangements and establish joint liability for an asset for their partner’s benefit. This may involve signing their name to a loan arrangement, knowing that both spouses’ joint income will be able to cover it.

For example, this may involve Spouse A undertaking an arrangement with Spouse B to benefit Spouse B’s business interest. At the time of marriage, that is, of course, also in the interest of Spouse A. However, following the end of the marriage, the success of Spouse B’s business interests may not be as of much interest to Spouse A, and the loan that Spouse A agreed to enter with Spouse B may not provide any financial advantage to Spouse A. With the failure of the marriage, Spouse A may find themselves in a difficult financial situation. Thus the continuing liability for Spouse B’s loan may cause them to be financially overburdened. This can be deemed as an unethical division of liabilities. Should this be found, their liability may be considered ineffective.

The Prenuptial Agreement

One solution to prevent a complicated divorce settlement is for the couple to agree to a prenuptial agreement. Prenuptial agreements (or “marriage contracts”) are not merely for high-profile celebrity power couples and should also not be seen as the marriage has failed necessarily. Prenuptial agreements are a means of recognising that marriages also involve a legal arrangement. They are a safety net for a possible future eventuality. Essentially, a good prenuptial agreement will apply a contractual plan for the division of assets. Should this be designed during the good years of the marriage, it may ensure that the assets in question are divided equitably.

Prenuptial agreements should therefore be designed by an experienced family law professional to ensure that the contract is fair and reflects the spouses’ wishes. A fair prenuptial agreement can result in far fewer complications in the equitable division of assets and property following a divorce.

Prenuptial agreements can be changed over time and must follow specific legal requirements. Some clauses that are deemed unfair when it comes to the division of assets, among other aspects, can be rejected in court as inherently unfair. Once again, it is vital to consult with a family lawyer when designing the prenuptial agreement.