Prenup 101: Must-Know Information Before Signing a Marriage Settlement
Weddings in the Philippines have become a veritable gold mine for wedding suppliers who promise to help
This indifference may be attributed to lack of relevant information, the notion that only rich people enter into prenups, the relative unacceptability of the concept of prenups in Philippine society or the fear of offending the future spouse and his or her relatives.
In Western countries, especially in the United States, prenups are acceptable and common, at least among celebrities. In fact, it is more shocking when foreign celebrities decide to marry without a prenup. In the Philippines, on the other hand, the decision of a local showbiz royalty to enter into a prenup created a frenzy and sparked a national debate on the propriety of executing prenuptial agreements. The emotional and social ramifications of deciding to enter into prenups are complex and unpredictable—this fact alone makes the very idea frightening for couples. Even more daunting are the legalities of entering into such an agreement. Unfortunately, some lawyers tend to complicate the legal side of prenups instead of simplifying it for the enlightenment of Filipino couples. To avoid getting lost in a legal maze, here is a crash course on the legalities of prenups in the Philippines:
Under Philippine laws, a prenuptial agreement is called a marriage settlement or an antenuptial contract. It is an agreement or contract entered into by a man and a woman who intend to get married, fixing the property relations that will govern their present and future properties during their marriage.
The decision to enter into a marriage settlement sometimes depends on the legal rights sought to be protected by the spouses.
In the absence of a prenuptial agreement, all of the couple’s separate present and future assets automatically become their common property. Philippine laws recognize the validity of marriage settlements. In fact, a marriage settlement that has been freely entered into by the spouses has primacy over Philippine laws. This means that for as long as the provisions in the marriage settlement are not contrary to law, morals, good customs, public order, or public policy, the law will not override the agreement of the spouses found in the marriage settlement.
The agreement can include almost anything that does not violate the standards mentioned above. Agreements as to who will be responsible for paying certain household expenses may be included. The marriage settlement may also encompass something as trivial as the delegation of household chores or as sensitive as level of spending. Future debt, future stock options, future retirement benefits— all can be designated. That said, certain provisions are not considered valid and would not be recognized in court, such as imposing a fine for infidelity or relieving one spouse of obligations to the support and education of the children. And as Philippine Law does not permit divorce, a marriage agreement cannot stipulate that the marriage may be dissolved for reasons other than death and annulment or invalidity of the marriage.
In order for the marriage settlement to be valid, it must be executed before the wedding. And as soon as the rings are exchanged and the words “I do” are off the lips, the agreement can no longer be modified or amended.
It goes without saying that the marriage has to take place for the marriage settlement to be valid. Should anyone be left standing at the altar, all those provisions painstakingly agreed upon will be void. (There is no runaway bride clause.) Of course, there are always exceptions to the rule—provisions that do not depend upon the marriage, such as the recognition of a child born out of wedlock, remain valid.
The decision to enter into a marriage settlement sometimes depends on the legal rights sought to be protected by the spouses. For instance, a widow need not enter into a marriage settlement for the purpose of protecting the inheritance of her children from a previous marriage. Philippine laws already exclude the widow’s property acquired before the second marriage, and the fruits as well as the income, if any, of such property, from the common property of the widow and her new spouse. This ensures that the rights of the children of the first marriage over the property will not be prejudiced.
In deciding whether to get a prenup, couples should assess the emotional and social impact it is likely to have and to weigh the costs of the preparation, execution and subsequent registration of the prenup against the benefits they hope to gain by entering into one.
But if the intention is for the children from a previous marriage to inherit all the property of the widow as well, then a marriage settlement should be entered into. Without a prenuptial agreement, the new husband will acquire a legal right to inherit at least a portion of the assets the widow intends her children to inherit. A marriage settlement is especially important for widows or widowers who want to protect the children’s inheritance from a deceased spouse. Such an agreement can also be of help in soothing the suspicions or resentments of grown children about a new stepparent; it demonstrates that any assets due to them will be protected for their use.
A marriage settlement is also not needed if the purpose is to ensure that one’s future inheritance will not form part of the common property. Property inherited by a spouse or acquired by donation during the marriage is excluded from the common property of the spouses.
Debts incurred by one spouse before marriage will not become the responsibility of the spouses after their marriage. Thus, a marriage settlement is not required if the purpose is to merely protect the common property and the personal property of the other spouse from such debts. If, on the other hand, a loan incurred by either the husband or wife before the marriage is used to purchase the conjugal home, both spouses, in the absence of a marriage settlement, will be responsible for the payment of the loan.
Clearly, a prenup is not for everybody, though it is certainly not only for the elite. In deciding whether to get a prenup, couples should assess the emotional and social impact it is likely to have and to weigh the costs of the preparation, execution and subsequent registration of the prenup against the benefits they hope to gain by entering into one.
MY PARENTS DIDN’T DO IT, WHY SHOULD I?
What many people don’t know is that the law that governed the marriages of our parents is extremely different from the law that governs our marriages today. While there was no need for a prenup before, today it is almost a necessity, particularly for those marrying in their mid-30s and above.
Our parents’ marriages were governed by the Civil Code of the Philippines, which stated that all property relations shall be governed by Relative Community or Conjugal Partnership of Gains, meaning the spouses chose the properties to be considered conjugal or common. These properties were jointly owned, while all other properties were considered paraphernal or separately owned by each person. The law also declared that all property brought by the wife to the marriage and all property she acquired during the marriage would be protected as her own; only its fruits would become conjugal property.
Under Conjugal Partnership of Gains, the only properties considered common were those acquired using common funds; those obtained by the industry, work or as salary of both spouses; and the fruits, rents or interests received during the marriage from all properties.
Clearly, a prenup is not for everybody, though it is certainly not only for the elite.
In 1987, the Family Code of the Philippines was promulgated, and it changed the rules of the game. Now, in the absence of a prenup, marriage law is governed by a system called Absolute Community of Property. In short, everything, no matter how or when acquired, is considered conjugal property. There are only a few exceptions, such as properties acquired through donation or inheritance. The distastefulness of a prenup stems from the idea of a spouse refusing to share the wealth he or she has already accumulated before the marriage. Yet requesting a prenup is not necessarily a selfish move, as there may be other people involved.
In Philippine society, it is not unusual for parents to buy properties such as cars or land for their children. Children often own shares of stock in the family business and are named as co-depositors on their parents or grandparents’ bank accounts. It is ordinary for individuals to hold properties in trust for other people, such as holding shares of stock for relatives who are abroad, and to co-own property with parents, siblings, and the clan.
Should the marriage fail and be dissolved, a soon-to-be ex-spouse could assert part ownership of all the properties which are in reality co-owned by the family. “Absolute Community of Property” means that as long as a spouse is named as owner, even assets actually shared by the entire clan are considered conjugal, and this leaves family members vulnerable. The time to clarify what will be considered shared or individual property is before the marriage when a prenuptial agreement can be of help. Since the law does not protect individual property the way it did in our parents’ time, a prenup can be defended as a logical way to protect the interests of loved ones.