BSM – community of property of spouses

What is community of property

Marital community of property is a legal regime in many legal systems that concerns the property relations between spouses. Under this regime, property acquired by the spouses during the marriage is considered to be the common property of both spouses, regardless of who acquired the property or who paid for it.

In the Slovak Republic, the community of property of spouses is regulated by the Civil Code. This regime means that all property acquired by the spouses during the marriage falls under the community of property, unless expressly excluded (e.g. by donation or inheritance). This includes income from work, business, but also things acquired in exchange for joint property.

Joint ownership means that both spouses have equal rights and obligations in respect of the community property and both must agree to its more significant legal dispositions, such as the sale of the property or other dispositions of the property above a certain value. After divorce, the community property is usually divided equally between the two spouses.

What is the essence of the community of spouses

The essence of the community of spouses (BSM) is the joint ownership by both spouses of property acquired during the marriage. This means that both spouses have equal rights and obligations in respect of these assets, regardless of who actually acquired them or from what sources.

Main principles of BSM:

• Equality: both spouses have an equal share in the community property, i.e. 1/2.
• Solidarity: both spouses are jointly and severally liable for debts incurred during the marriage.
• Equitable division: on dissolution of the BSM, the property is usually divided into two equal parts. However, the spouses can also agree on a different division ratio.
• Protection of the family: the BSM also serves to protect the family and the children so that they have the material conditions for life.

The essence of BSM differs from ordinary community of property in the following aspects:

• Automatic formation: BSM is created automatically upon marriage, as opposed to community of property, which must be created by agreement between the parties.
• Legal regime: BSM is regulated by law and deviations from it are only possible to a limited extent, whereas community of property is governed by the contractual freedom of the parties.
• Universal character: the BSM includes all property acquired during the marriage, with exceptions, while the community of property includes only property that the parties have expressly included in it.

BSM is a complex legal institution with various aspects. If you have any questions about BSM, I recommend that you contact a lawyer who can give you expert advice with regard to your specific situation.

Can BSM be changed?

Yes, the community of spouses (BSM) can be changed or excluded completely by agreement between the spouses. This agreement is called a marriage contract or prenuptial agreement if it is concluded before the marriage. A marriage contract allows the spouses to adjust their property rights and obligations according to their needs and wishes.

The marriage contract may provide that certain assets which would otherwise fall under community of property are to be excluded and treated as the personal property of one of the spouses. It may also provide for other property regimes, such as community of property or complete separation of property.

A change of property regime through a marriage contract must comply with the law and usually requires a notarial form to be valid and have legal effect. It is important for spouses to consult a lawyer who specialises in family law before entering into such an agreement to ensure that their agreement is legally correct and takes into account all aspects of their situation.

Example for extending the scope of the BSM:

Situation:
Peter and Zuzana are getting married and want to include in the BSM the flat that Peter inherited from his grandmother before the marriage.

Solution:
Peter and Susan cannot automatically include the apartment in the BSM because it is property that Peter acquired before the marriage. However, there are two ways to include the apartment in the BSM:

1. Agreement on the extension of the BSM:

• Peter and Susan enter into a written agreement on the extension of the BSM, in which they state that the flat that Peter inherited from his grandmother becomes part of the BSM.
• The agreement must be in writing and certified by a notary public.
• Once certified by a notary, the agreement becomes binding on both spouses and the apartment becomes part of the BSM.

2. Inserting the apartment into the BSM after its acquisition:

• Peter and Susan wait for Peter to register the flat in his name at the Land Registry.
• After the apartment has been transferred to Peter, Peter and Zuzana conclude a written agreement on the insertion of the apartment into the BSM.
• The agreement must be in writing and does not have to be certified by a notary public.
• Once the agreement is signed, the apartment becomes part of the BSM.

Example for narrowing the scope of the BSM:

Situation:
Jan and Maria have been married for 10 years. During their marriage they bought a house from BSM. John has an inherited cottage which he wants to exclude from the BSM.

Solution:
John and Mary cannot unilaterally exclude the cottage from the BSM because it is a property that belongs to the BSM. However, there is one way to do it:

1. Agreement on the narrowing of the BSM:

• John and Mary conclude a written agreement on the reduction of the BSM, in which they state that the cottage that John inherited is excluded from the BSM.
• The agreement must be in writing and certified by a notary public.
• Once certified by a notary, the agreement becomes binding on both spouses and the cottage becomes the sole property of Jan.

An agreement on the reduction of the BSM can only be concluded during the marriage. The agreement on the reduction of the BSM must not infringe the rights of the other spouse. This means that John and Mary must agree in the agreement on an equitable settlement regarding the family home, which is still in the BSM. If you are in any doubt, it is advisable to contact a lawyer who can advise you on the legal aspects of narrowing the BSM.

In addition to the cottage, other assets can also be excluded from the BSM in this way. However, the above procedures must always be followed and the principles of fairness and protection of the rights of both spouses must be respected.

What (doesn’t) belong in the BSM?

What belongs to the BSM?

The community of spouses (BSM) includes all property acquired by the spouses jointly or by one of them during the marriage, with exceptions:

Things that do not belong to the BSM:

• Property acquired by inheritance or gift by one of the spouses.
• Things serving, by their nature, the personal or professional needs of only one spouse.
• Things issued in the context of restitution of property to one of the spouses.
• Property acquired before the marriage, if the spouses have not put it in writing in the BSM.
• Proceeds from the sale of property that was the sole property of one of the spouses before the marriage.
• Property acquired by one of the spouses through criminal activity is not included in the property of the matrimonial property regime.

Examples of things that belong to the BSM:

• Salaries and wages of both spouses
• Savings on current accounts and passbook accounts
• Jointly acquired property (house, flat)
• Jointly acquired car
• Jointly acquired household equipment
• Income from investments acquired jointly during the marriage

What happens to the BSM on dissolution of the marriage?

On dissolution of the marriage, the BSM is settled. This means that the property belonging to it is divided between the spouses. As a rule, it is divided into two equal parts, but the spouses can also agree on a different division ratio. In the event of a dispute, the court will divide the property according to the principles of equity. The duration of the marriage, the contribution of both spouses to the common household and the care of the children are also taken into account when settling the BSM. The spouses can regulate the BSM by a marriage contract, but it cannot be excluded completely.

Are wages included in the BSM?

Yes, one spouse’s salary belongs to the community property of the spouses (BSM). This means that it is part of the spouses’ community property, which they dispose of jointly. Wages used by one spouse for personal needs, such as buying clothes or gifts for themselves, are not part of the BSM. Even if the wages are part of the BSM, the spouse who receives them can dispose of them independently, as long as they do not do so to the detriment of the other spouse or the joint family. In practice, this means that the spouse can use his/her wages, for example, to pay for current household expenses, invest in joint property or buy something for himself/herself. However, if the husband spent all his wages on gambling or buying a luxury car for himself, the other spouse could claim his share of those wages. In addition to wages, other income from work, such as fees, bonuses, pensions and maternity leave, also belongs to the BSM.

Inheritance and BSM

Inheritance and its relationship to the community of property (CPL) is an important aspect to be taken into account in the administration of matrimonial property. Under the law in Slovakia and in many other jurisdictions, an inheritance belongs to the personal property of the spouse who receives it and is not automatically included in the community of property of the spouses.

In practice, it is important for spouses to be clear about how assets are classified and what their expectations and plans are for their future use or distribution, especially where significant assets such as inheritances are involved.

Does the car belong to the BSM?

Yes, a car may belong to the BSM, but it may not under certain circumstances.

When a car belongs to the BSM

• Joint acquisition during the marriage: if you bought the car together with your spouse during the marriage with funds belonging to the BSM (wages, savings), then the car will belong to the BSM.
• Pre-marital car financed from the BSM: if you had a car before the marriage but used BSM money to repair or improve it during the marriage, such a car could also be considered part of the BSM (at least with a part corresponding to the BSM money contributed).

When a car does not belong to the BSM

• Pre-marital car financed from own funds: if you had a car before the marriage and financed it yourself from your own money that you had before the marriage (salary, savings), then the car will not belong to the BSM.
• Inheritance or gift: if you received the car as an inheritance or gift from someone else during the marriage, the car will not belong to the BSM.
• Marriage contract: If you have a marriage contract with your spouse that excludes certain types of property from the BSM, and the car is part of this contract, then it will not be part of the BSM.

Do gifts belong to the BSM?

No, gifts do not usually belong to the community of property of the spouses. Gifts are generally considered to be the property of the spouse to whom they were given.

However, certain exceptions apply:

• Donor’s intention: if the donor (the one who donates the object) clearly proves that he/she has donated the object to both spouses jointly, the gift can be considered as part of the BSM. Evidence of such intention may be a gift deed or other written acknowledgement.
• Joint use of the gift: if the gift (e.g. money) has been used for the common needs of the family or for an investment in common property (e.g. renovation of a BSM flat), the other spouse can claim reimbursement for the funds spent from the gift.

When a gift does and does not belong to the BSM

Real estate as a gift
If parents give an apartment to their son, this apartment will not be part of the BSM of the son and his wife. However, if the parents state in the gift deed that they are giving the apartment to the son and his wife jointly, then the apartment will be part of the BSM.

Money as a gift
If a grandmother gives money to her granddaughter, this money will not be part of the BSM of the granddaughter and her husband. However, if the grandmother states in the gift agreement that she is giving the money to the granddaughter and her husband to renovate the house that is in the BSM, then in the event of a divorce, the funds from the gift could be considered to have been put into the BSM.

Do the winnings belong to the BSM?

Whether a lottery or other gambling winnings belong to the community of property depends on several factors. However, if one spouse gambles alone and wins, the winnings belong exclusively to him or her, even if he or she used money from the community property to play the game. The reason for this is that gambling is not considered to be a common interest of the spouses. Winnings from lotteries and gambling are exempt from income tax, so there are no tax liabilities associated with them.

How to annul a BSM

The community of spouses (BSM) can only be dissolved during the marriage for two legal reasons:

1. Acquisition of a business licence by one of the spouses
If one of the spouses acquires a business licence (trade licence, extract from the commercial register), the BSM may be dissolved from the moment of acquisition of the licence. The reason for this is to protect the other spouse’s assets from the risks of the business. After the dissolution of the BSM, the assets that previously belonged to the BSM are divided between the spouses by agreement or by court decision.

2. The continued existence of the marriage would be contrary to good morals
BSM can be dissolved even if the court finds that the continued existence of BSM would be contrary to good morals. This is a very serious reason which is assessed on a case-by-case basis. The court may take into account various factors such as:

• Permanent dissolution of marriage
• Abuse of the BSM by one spouse for unfair purposes
• Alcoholism or drug addiction of one of the spouses
• Domestic violence

The burden of proof is on the spouse who seeks the dissolution of the BSM on this ground.

Procedure for dissolution of BSM

1. If you want to dissolve the BSM, you have to file a petition with the court.
2. The petition must contain information about the spouses, the reason for the dissolution of the BSM and the proposal for the settlement of the BSM.
3. The petition must be accompanied by documents proving the reason for the dissolution of the BSM (e.g. trade certificate, divorce decree).
4. The court will then examine your proposal and decide on the dissolution of the BSM and the settlement of the BSM.

The dissolution of a BSM is a serious legal step with far-reaching consequences. Before filing a petition with the court, it is advisable to consult a lawyer to help you through the process and protect your interests. The dissolution of the BSM does not affect the spouses’ mutual maintenance obligations.

Why annul BSM

There are several reasons why you might decide to dissolve the community of property:

Asset protection

If one of the spouses is in business, the dissolution of the BSM can protect the other spouse’s assets from the risks of the business. In the event of the bankruptcy or indebtedness of the entrepreneur, the other spouse would not have to lose his or her assets belonging to the BSM. A BSM dissolution can also be useful if one spouse is prone to gambling, overspending or other irresponsible financial behavior.

More control over finances

After the dissolution of the BSM, each spouse has more control over his/her finances. The spouses manage their own income and expenses and do not have to keep each other informed of everything.

Easier division of property in case of divorce

If the spouses divorce, the dissolution of the BSM may make it easier for them to divide their property. Assets that belonged to the BSM will no longer have to be divided into two equal parts, but the spouses can agree on them as they wish. This can lead to less conflict and disputes in divorce.

Tax benefits

In some cases, the dissolution of BSM can bring tax advantages. For example, if one of the spouses runs a business, he or she can deduct tax expenses from his or her entire income after the dissolution of the BSM, not just half of it as in the case of a BSM. The dissolution of a BSM is not suitable for everyone. It is important to weigh up all the pros and cons and consult a lawyer before taking this step.

Dissolution of BSM and mortgage

The dissolution of the community of property (Cohabitation) and the mortgage are two separate topics that must be considered separately.

Effect of the dissolution of the BSM on the mortgage

• Co-borrowers: if you and your spouse took out the mortgage as co-borrowers, the annulment of the BSM has no direct effect on it. Both of you remain liable to the bank for the mortgage repayments. In the event of default on the mortgage, the bank can recover the debt from both of you, even if you have dissolved the BSM.
• Ownership of the property: the dissolution of the BSM does not affect the ownership of the property financed by the mortgage. If the property is registered in the Land Registry in the names of both spouses as co-owners, it will remain in their joint ownership unchanged after the dissolution of the BSM.
• Changing the mortgage repayment: if you want to change the way you repay your mortgage after the dissolution of the BSM (for example, one of you becomes the sole debtor or the amount of repayments changes), you must contact the bank and ask for its consent. The bank will assess your application and take into account various factors such as your creditworthiness and ability to repay the mortgage.

Is there an advantage of a dissolved BSM when applying for a mortgage?

The dissolved community of property can have certain advantages when applying for a mortgage, but also disadvantages.

Benefits

• Better creditworthiness assessment: if the mortgage is taken out on only one spouse, the bank will assess his/her individual creditworthiness. This means that only his or her income, expenses and credit commitments will be taken into account. If one spouse has a lower credit burden or a more stable income, the annulment of the BSM may help him or her to be approved for a mortgage with a better interest rate.
• Greater flexibility in disposing of the property: if the property financed by the mortgage is registered in the Land Registry in the name of only one spouse, he/she can dispose of it more freely. For example, he or she can sell it, donate it or mortgage it without the consent of the other spouse.
• Easier division of property in case of divorce: if the spouses divorce after the dissolution of the BSM, the division of the mortgage-financed property will be easier. The property will belong only to the spouse who is registered as the owner in the Land Registry.