Separate Property Regime in Switzerland: Advantages and Disadvantages
There are various marital property regimes in Switzerland. Among married couples with a marriage contract, the separation of property is the most common. Under this regime, both spouses retain rights to their own assets, and there are no joint property rights. This property regime can be more advantageous for some couples and less for others, depending on their individual financial situations before and during the marriage. This article explains what this regime entails and who it is suitable for.
What is the Separation of Property Regime?
If the property regime is not otherwise regulated by a marriage contract, the property regime of participation in acquired property applies by default according to Article 181 of the Swiss Civil Code. Separation of property is an arrangement of financial relations that is not the norm but an exception. It can therefore only be established through a marriage contract or enforced by court order (Articles 181 – 185 CC).
Neither Joint Ownership nor Joint Debts
Under the separation of property, spouses do not share ownership of their assets; each manages their own property independently – as stated in Article 247 CC. In the event of a divorce in Switzerland, the assets do not need to be divided between the spouses since there are no property claims on each other's assets. In this sense, separation of property is a type of "non-property regime." It should also be noted that under this regime, there are no joint debts between the spouses, nor can one spouse's debts be transferred to the other (Article 249 CC). Each spouse is liable for their own debts with their entire personal assets during the marriage and in the event of separation. If there are debts between the spouses, these must be settled in the event of a divorce (Article 250 CC).
An inventory of the spouses' assets before and during the marriage is required under this regime to determine the ownership of each asset (Article 195a SCC). If ownership of an asset cannot be established, both spouses are considered equal owners under Swiss law (Article 248 CC).
Separation of Property and Business Succession Law
The separation of property is particularly important when one spouse owns a business. Without a marriage contract, and thus under the regime of participation in acquired property, the income from a business automatically becomes part of the couple's joint property, which can lead to disputes in the event of a divorce. To ensure the continuity of a business founded before marriage, opting for the separation of property is advisable.
However, what happens if the business is founded or inherited during the marriage? Under the separation of property regime, the business assets remain the property of the business owner. If the ordinary property regime (participation in acquired property) applies and the business is founded or inherited during the marriage, it becomes jointly owned by both spouses unless specified otherwise in a marriage contract. In a divorce, without a marriage contract, one spouse would have to buy back the other's share of the business.
Exceptions to Separation of Property
Generally, under separation of property, spouses are not jointly liable for debts. Each spouse retains ownership of their assets. If one spouse has debts, the other cannot be held jointly liable (Article 249 CC). However, there are exceptions. If the spouses have jointly signed a loan agreement, they are both responsible for repaying the loan and are jointly liable for the debt.
Additionally, the separation of property does not apply to pension funds. The pension capital accrued during the marriage is divided equally between the spouses in the event of a divorce, even under this regime (Article 122 et seq. CC). If you have further questions, you can always consult a lawyer.
When Should You Choose Separation of Property?
The purpose of property regimes is to grant spouses freedom in managing their assets while also ensuring the economic independence of both partners in the event of a separation or death. For this reason, separation of property is not suitable for all couples, and the regime of participation in acquired property is initially prescribed by law. Separation of property allows spouses to fully maintain their financial independence from each other during and after the marriage, making it particularly suitable for couples with real estate or businesses.
Under the ordinary property regime (participation in acquired property), the assets brought into the marriage and acquired during the marriage are jointly owned by both spouses. This can lead to disputes over property in the event of a divorce or death. Separation of property can avoid such disputes, as each spouse owns their respective assets. The same applies to debts, except for jointly signed loans.
On the other hand, separation of property poses a risk for a spouse with fewer assets and no financial activity, as they may end up without financial means after a divorce. Under this regime, each spouse retains their assets at the time of separation, with no participation in the other's gains. Therefore, a spouse may be left without assets and may only claim maintenance payments.
How Can You Implement the Separation of Property?
If a couple wishes to adopt the marital property regime of separation of property, it must be formally and legally established in a marriage contract. It is best to consult a family law attorney for this process. However, separation of property can also be mandated by law or a court decision. A court can order separation of property during the marriage at the request of one spouse or a supervisory authority, even against the will of one spouse.
Separation of property particularly applies in cases of:
- Bankruptcy of a spouse with a community property regime (Article 188 CC);
- Over-indebtedness at the request of one spouse (Article 185 CC);
- Refusal to provide information about assets at the request of one spouse (Article 185 CC);
- Denial of access to joint assets at the request of one spouse (Article 185 CC);
- Request by the legal representative of one spouse (Article 185, Paragraph 3 CC);
- Request by the supervisory authority (Article 189 CC).
Termination of Separation of Property
It is also possible to terminate the separation of property and establish participation in acquired property or community property as the marital property regime. If this decision is made by the spouses, both must agree and amend the marriage contract or create a new one (Article 187, Paragraph 1 CC).
If there is no mutual agreement between the spouses, this change can also be decided by a court if requested by one spouse. Separation of property can be partially lifted if there are no substantial reasons for it. This can happen, for example, if a spouse has paid off debts incurred before the marriage (Article 187, Paragraph 2 CC).
Separation of Property and Inheritance Law
In the event of the death of a spouse, under the regime of participation in acquired property, the entire estate is divided between the surviving spouse and the children. However, under separation of property, inheritance matters are different. In the event of the death of one spouse, the surviving spouse retains ownership only of their own assets, not those of the deceased spouse, unless special provisions are made.
FAQ: Property Regime of Separation of Property
The separation of property regime governs the ownership of assets. This regime entails a strict separation of assets between the spouses both before and during the marriage. Under this regime, the spouses never have joint assets or joint debts.
The major advantage of this regime is that property divisions during a divorce are remarkably straightforward. Each spouse returns the assets belonging to the other, and any mutual debts are settled. If there are remaining assets whose ownership cannot be clearly determined, these are initially considered joint property. The spouse with a greater interest in these assets can take them over, provided they compensate the other spouse for their value.
The legally prescribed property regime in Switzerland, according to Article 181 of the Swiss Civil Code (CC), is the regime of participation in acquired property, not separation of property. If a couple wants to marry under the separation of property regime, this must be stipulated in a marriage contract. This contract must be notarized to be legally valid.
This regime is recommended for spouses with substantial assets or real estate holdings. It is also suitable for entrepreneurial spouses who want to protect their business from potential legal disputes in the event of a divorce.
Spouses can change their property regime at any time with a (new) marriage contract, which must again be mutually agreed upon and notarized. In the case of separation of property, the regime can also be dissolved once the reason for the separation of assets is no longer relevant (Article 187, Paragraph 2 CC). For instance, this could occur if one spouse has paid off their debts, and thus the joint marital assets are no longer at risk.
Especially under a separation of property regime, it is highly advisable to attach a jointly prepared inventory list to the marriage contract. This ensures that your ownership of assets can be clearly established in the event of a divorce. According to Article 195a CC, you have the right to demand that your spouse participates in creating such an inventory list at any time.