Settling Joint Marital Property (SJM)

What does each former spouse get after a divorce? And what happens when one spouse dies? What are the rules for settling joint marital property (known in Czech as "společné jmění manželů" or "SJM"), and what should you watch out for?

Settling joint marital property is a key step that follows a divorce or the death of one spouse. For many people the process is stressful and hard to make sense of, which is exactly why it helps to know what the rules are, how the settlement works, and how the right legal approach can make things easier.

In this article we explain the basic rules for settling SJM, the ways the property can be divided, the role of an agreement between the spouses, and what to do if they can't agree.

What is joint marital property (SJM)?

Joint marital property comes into being automatically when a couple marries, unless the spouses agree a different arrangement by contract. SJM usually includes:

The income of both spouses (wages, bonuses, business earnings, and so on)
Property acquired during the marriage (real estate, cars, household furnishings)
Debts taken on during the marriage (for example loans and credit)

SJM does not include, above all, property that just one spouse received as a gift or an inheritance, or property that is one spouse's exclusive property.

When does SJM come to an end?

Joint marital property ends when the marriage ends. It can end, or be narrowed, in the following situations:

By divorce
By the death of one spouse
By a court decision narrowing or cancelling SJM during the marriage

In every case, the property relationships between the spouses (or between the surviving spouse and the heirs) have to be settled. A settlement is carried out even where the existing scope of SJM was only narrowed.

So what does settling SJM actually mean? It means winding up the rights and obligations that were shared until then and dividing them between the spouses. And how does SJM work once it has ended but has not yet been settled? It works just like ordinary SJM, right up until the moment it is settled.

How does settling SJM work?

There are three basic ways to settle it.

Agreement between the spouses: This is the fastest and least confrontational option. The agreement can be made in writing or orally, but be careful: written form is mandatory if the settlement involves real estate, for example, or if the agreement was made while the marriage was still in place.

A court decision: If the spouses don't agree, either of them can file a lawsuit to have SJM settled. The court then decides according to the statutory rules. The usual starting point is an equal share of both the assets and the debts. The court divides up ownership of the individual items in the SJM and orders whichever former spouse ends up with the more valuable property to pay the other a settlement share (the amount of which the court calculates). The court also takes into account how each spouse contributed to acquiring the property, as well as how each of them cared for the family (the children) and the household.

The statutory presumption after 3 years: If there is no agreement and no lawsuit within three years of SJM ending, what is known as the statutory presumption of settlement takes over:

Tangible movable items (such as furniture and appliances) go to whoever uses them exclusively.
The rest of the property (including real estate) becomes co-ownership with equal shares for each spouse.
Debts and receivables are shared, with both spouses holding equal shares.

What to watch out for when settling SJM

The 3-year deadline: Many people have no idea that if they don't settle within three years of the divorce (or the death), the statutory presumption applies automatically. In plenty of situations that can work against you, especially where the property is complicated, tied up with a business, or where there are hidden debts.

Note that with real estate, within that three-year period you need not only to make the settlement agreement but also to have it registered in the Land Registry, because an agreement on settling real estate only takes effect once it is actually entered there.

The rights of third parties: Settling SJM must not interfere with the rights of third parties, typically creditors or co-owners. So an agreement between the spouses can't make a shared debt to a bank go away, or release one of them from guaranteeing a loan.

The form of the agreement: The settlement agreement has to be in writing where the nature of the property calls for it. With real estate, the agreement must also be entered in the Land Registry.

The effects of the agreement: Even if the spouses reach agreement later on, the agreement takes effect retroactively, back to the day SJM ended or was narrowed. This can have a real impact on tax and property matters.

Settling SJM after the death of a spouse

When one spouse dies, SJM is settled first and only then is the inheritance dealt with. This means that one half of the couple's property is first "separated out" as belonging to the surviving spouse, while the other half passes into the probate proceedings. The heirs of the deceased spouse can also reach a settlement agreement with the surviving spouse.

The surviving spouse is at the same time a statutory heir and, in the first class of heirs, inherits together with the deceased's children. This rule can be changed, for instance by a will.

How can a lawyer help?

Legal help is often essential when settling SJM, particularly:

When planning how to divide the property while the marriage is still in place
Where the property is extensive or involves real estate or a business
Where one spouse is hiding assets or concealing debts
Where the spouses can't agree and a court dispute is on the horizon

Our law firm has extensive experience with both out-of-court agreements and court settlements of SJM. We will help you protect your property, negotiate fair terms, and resolve the situation quickly and with as little stress as possible.