For better or for worse: Pre-nuptial agreements

Fun Fact: May is the second most popular month for Filipinos to get married, something I was reminded about recently, having just received several wedding invitations.

The institution of marriage holds significant importance in our society, and as such, the laws surrounding this sacred bond are of utmost importance. Among the various legal aspects that come into play when two individuals decide to tie the knot is the concept of marriage settlements or pre-nuptial agreements, which we commonly refer to as prenups.

Here in the Philippines, prenups are not as accepted as in western countries. In my 20 years of law practice, I count about 10 times where clients have approached me to ask about prenups. And only half of these were actually formalized and registered. Over the years, more Filipinos have slowly started to accept prenups, although it remains to be a touchy subject for many.

Years ago, our client who owned a successful business asked our law office to draft a prenup for their daughter who was set to get married. The only condition in the prenup was that the soon-to-be husband would not receive or be entitled to any share or ownership in the family business. When the prenup was presented to the would-be husband, he was not too pleased, and he instead proposed a total separation of property in the marriage. Last I heard, the couple are still happily married.

Another client of ours who was about to be married received substantial properties and cash from their parents before the wedding. The would be husband felt it would be a good idea to have a prenuptial agreement since his parents had experienced a messy dispute over community property when they separated.

Prenups are governed by the Family Code of the Philippines, which provides that the husband and wife may enter into a marriage settlement before the celebration of their marriage, which will define their property relations during the marriage. (Art. 75, Family Code)

All marriages celebrated on or after Aug 3, 1988, which is the effectivity of the Family Code, are by default covered by the Absolute Community of Property regime (Art. 91, Family Code).

This absolute community of property regime simply means that all the property owned by the husband and wife at the time they are married, as well as all properties acquired or bought after the marriage, shall be included in the community property jointly owned by the husband and wife. The law presumes that all property acquired during the marriage forms part of the community property (Art. 91 & 93, Family Code).

There are only limited exclusions to the absolute community of property which are:

1. Property acquired during the marriage by donation by either spouse, unless the donor indicates that the donation is to both the spouses
2. Property which are for the personal and exclusive use of either spouse, except that jewelry shall form part of the community property
3. Property acquired before the marriage by either spouse, who has legitimate descendants by a former marriage and the fruits and income of the property (Art. 92, Family Code)

The absolute community property covers everything and is almost perpetual, as it only terminates or dissolves in certain instances, such as the death of either spouse, when there is a decree of legal separation, when the marriage is declared annulled or void, and when a court orders the judicial separation of property under certain instances provided for in the Family Code. (Art. 99, Family Code)

Realizing the scope and permanency of the absolute community of property and perhaps the increase in failed marriages, Philippine society has slowly started to accept the concept of prenups.

The Family Code provides that, through a prenup, the husband and wife can agree that their property relations during the marriage shall be governed not by the absolute community of property, but by another property regime such as partial or complete separation of property. A prenup, to be valid, must comply with the following requirements:

a. Prenups or their modifications must be in writing
b. They must be signed by both the husband and wife
c. The signing must be done before the celebration of the marriage
d. For the prenup to affect third parties, it must be registered in the local civil registry where the marriage contract is recorded as well as in the proper registry of deeds
e. If any party to the marriage settlement is suffering from a disability, their legal guardian must also sign the marriage settlement (Art. 77 & 78, Family Code)

Prenups can only be modified prior to the celebration of the marriage except in the following instances:

a. The property relation was dissolved and liquidated upon a decree of legal separation
b. The spouses who were legally separated reconciled and agreed to revive their former property regime
c. Judicial separation of property declared by the court
d. A joint petition by the husband and wife with the court for the voluntary dissolution of their property relations. (Pana vs. Heirs of Juanite, et al., G.R. No. 164201, December 10, 2012)

It is notable that the prenup is in essence a contract between the husband and wife. Accordingly, the agreement must not contain any provisions that are contrary to law, morals, good customs, public order, or public policy. Though, if the marriage does not take place, the agreement on the property regime will not be effective. Except that being a contract, there may be other stipulations contained in the prenup which do not depend on the marriage taking place and, being an agreement and contract, such agreements may still be effective and bind the parties to the prenup. (Art. 81, Family Code)

For example, if the parties had agreed to provide monetary support or an allowance to the other or to a common child, which was not dependent on the marriage, then that would be binding. Moreover, if the prenup also contained an acknowledgement of paternity of a child, then this would be binding upon the man, despite the marriage not having pushed through.

People may consider entering into prenups for different reasons. Some reasons may be to provide financial clarity to their marriage relationship, in order to protect individual assets, and perhaps to define financial responsibilities of the husband and wife during the marriage.

There may be drawbacks though, for example, proposing to enter into a prenup may be seen as a lack of trust or commitment between the parties. Prenups may not also cover all matters such as child support and visitation rights, and having a prenup may perpetuate or exacerbate economic inequalities between spouses, particularly if one spouse has significantly more assets or income than the other.

In conclusion, prenups, while a sensitive subject for many Filipinos, are gradually gaining acceptance as a practical and proactive measure to protect individual assets and define financial responsibilities within a marriage. Ultimately, the decision on whether to have a prenup is a personal one to the married couple and it should be made with careful consideration and in open communication between the parties.

(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, teaches law at the MLQU School of Law, and an Arbitrator of the Construction Industry Arbitration Commission of the Philippines. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)