Foreign assets in the equalization: which property law applies

First the property regime, then the calculation

In a purely German case it is clear that the Zugewinngemeinschaft applies. As soon as the assets or the spouses themselves have an international element, that is no longer self-evident. Before the question of how much is to be equalized comes the question of under which law the division happens at all. For not every country knows the equalization of accrued gains: other legal systems work with a community of acquisitions or with models entirely of their own.

That preliminary question has been answered since 2019 by the EU Matrimonial Property Regulation Regulation (EU) 2016/1103, which applies in Germany and in the other participating member states. It determines uniformly which property law is to be applied to the marriage.

Which property law applies absent a choice?

Where the spouses have agreed nothing, a graduated connection applies Art. 26 EU Matrimonial Property Regulation: what counts first is the law of the state in which they had their first joint habitual residence after the wedding. Where there is no such residence, the joint nationality at the time of the marriage applies, and failing that the closest connection.

What matters is the stability of that connection: once determined, the property regime does not in principle travel along. A German couple who lived in Germany at first after the wedding stay as a rule in German property law, even where they move abroad later.

The choice of law as a lever

The spouses do not have to leave it to the chance of where they live. With a choice of law they determine the applicable property law themselves Art. 22 EU Matrimonial Property Regulation, that is the law of the habitual residence or of the nationality of one of them, before or during the marriage. The choice is subject to a form requirement and is as a rule recorded by a notary.

For binational and mobile couples it is the most important drafting tool of all. It creates clarity before the dispute arises, and it is the only point at which the connecting factor can still be influenced. Everything else follows from places of residence that lie long in the past.

Do assets outside the EU fall into the accrued gains as well?

Once the applicable law is established, it applies to the entire assets worldwide, regardless of where the individual items are located Art. 21 EU Matrimonial Property Regulation. And it applies even where it would be the law of a non-EU state Art. 20 EU Matrimonial Property Regulation. Where German property law applies, then, the holiday home on the Mediterranean, the account in your home country and the foreign shareholding enter the equalization of accrued gains just as domestic assets do. No asset therefore stays outside that calculation as a “tax-free haven abroad”.

For marriages before 2019 the old law still applies

One point at which many accounts stop and at which most cases begin.

The EU Matrimonial Property Regulation covers marriages concluded from 29 January 2019 onwards, and cases in which a choice of law was made from that day. For all older marriages the conflict-of-laws rules that applied before it continue to govern, and they attached differently.

In practice that means a look at Art. 26 of the regulation does not help with a marriage from 2005. Which property law governs then has to be answered under the older rules, and the answer can be a different one.

Because most divorces concern marriages concluded well before 2019, this is currently the normal case rather than the exception. Anyone who finds an account of the regulation online and applies it to their marriage from 1998 is calculating with the wrong law.

What a foreign property regime actually changes

That another law applies sounds abstract. Three examples make the difference tangible.

The community of acquisitions, which Spanish law for instance knows as its statutory regime, does not divide the increase in value. It assigns what was acquired during the marriage to both jointly. That is not a claim for money but joint ownership, and it is wound up rather than equalized.

Separation of property as the statutory regime, as other legal systems provide, means that at the end of the marriage there is simply nothing to equalize. Whoever cared for the children during the marriage is then left without any claim under matrimonial property law.

The valuation date differs as well. German law calculates on the day the divorce petition is served § 1384 BGB. Other legal systems take the separation or the finality of the decision, and with fluctuating values that makes a considerable difference.

The difference therefore lies in the construction, not in the level of a quota. That is also why a foreign property regime cannot be converted roughly into German figures.

The real hurdle: valuation and enforcement

With that the law is clarified. The practice only begins. The right to disclosure reaches over foreign assets as well § 1379 BGB. Having it is something other than enforcing it. Obtaining supporting documents from abroad, valuing property and shareholdings there and enforcing a German title across the border costs effort. It also needs cooperation with colleagues on the ground. What gets more expensive in the cross-border case is the preparation, less the calculation itself.

Four things tend to cost the most time. The certified procurement of land or company register extracts. A valuation report meeting the standards of the state where the asset lies. The conversion of foreign currencies to the cut-off date. And the question whether a German title can be enforced there at all.

Anyone who starts on that only after the divorce petition has been served loses months. Procurement can be brought forward, regardless of whether the case ends in a dispute or in an agreement.

Where a property abroad is at the centre, the same rules apply to its valuation as at home; on that, the property in the equalization of accrued gains. Where a business is involved, the route runs through the business valuation.

What such cases come down to in the first conversation

Almost never the legal question. Anyone arriving with assets abroad usually has a clear picture of what belongs to them and a very unclear one of what can be documented.

The second recurring observation concerns the other side. Assets lying abroad strike many people as harder to reach, and some rely on that. The right to disclosure reaches there all the same, and anyone who lets assets disappear unexplained has to expect them being added to their final assets as though they were still there.

Anyone with a property abroad should therefore gather three things before the first meeting: the proof of acquisition with date and price, the current register extract, and the papers on every charge over it. That puts half the work in place before it has been instructed. The frame of the calculation as a whole is explained by our page on assets & accrued gains; the remaining questions with an international element, that is jurisdiction, the applicable divorce law and recognition, are dealt with by international family law.

Legal notice: This article is provided for general information and does not replace legal advice in an individual case. Any laws, deadlines and amounts mentioned reflect the state of affairs at the time of publication and may change. A binding assessment requires a personal consultation.