Of pre-nups and balance sheets

Today is Valentine’s Day and love should be in the air. However, lately, prominent showbiz couples have experienced break-ups, the most recent one is that of engaged couple Bea Alonzo and Dominique Roque. The “Maritess culture” of our society has put forward different versions of why this relationship fell apart. A recurring theme of these versions is about the pre-nuptial agreement. 

What’s this got to do with FQ? Well, it is right smack in the realm of family money matters. 

For all the heartache that this break-up has caused the couple and the people around them, the brighter side of it is that it happened before they said “I do.” And because of the high-profile nature of their break-up, more people are made aware about the importance of getting to know each other well – beyond the “He/She makes me happy, etc.,” but deep into balance sheet level.

Unfortunately, discussing money matters is systematically neglected by almost all couples starting a family. 

These days, it takes several months to more than a year to prepare for a wedding. It literally takes a village to pull off a wedding – coordinators, stylists, photographers who are separate from videographers, florists, couturiers, hair and make-up artists, scent specialists, and many many more! You wouldn’t believe the many details the bride and groom have to mind for one day of pageantry. I’m all for beautiful weddings (I’ve had six so far, but don’t worry it’s with the same man), but I just hope that couples also devote time to prepare for the life-long commitment of marriage. A basic but overlooked part is understanding the property law that will govern the marriage.

When you enter into a marriage contract here in the Philippines, you and your partner become one, not only in heart, mind and soul, as our wedding ceremonies always remind us. You also become one pocket, one pool of assets, one balance sheet! But no one says this explicitly, and then almost always, people sign into a permanent contract without really knowing what they’re getting themselves into. 

In a casual mini survey I conducted a few years ago, majority of the respondents said they do not know the laws that govern the ownership of their properties as married couples. Close to 100% didn’t bother to read the Family Code that states the property law governing marriage in the Philippines. Honestly, my husband and I signed our marriage contract over three decades ago just with a vague idea about it. We didn’t read the Family Code. Maybe because we were the typical young couple in love with little or no properties to consider. 

With the rate of separations these days, it is imperative that every couple considering marriage understands what it is getting into. In fact, even with #MayForever in our mind and heart, we are still better off understanding what we get ourselves into in marriage.

So what property laws govern your marriage? Do you know? Let’s take a look. 

Absolute Community of Property vs Conjugal Partnership of Gains

If you got married prior to Aug. 3, 1988 your marriage is governed by the Conjugal Partnership of Gains (CPG). Under this law, the spouses retain ownership of properties owned prior to the marriage. Only the fruits or income derived from these previously acquired properties will form part of the common pool or conjugal property. Then all other properties acquired by either spouse during the marriage will likewise form part of the common pool.

Starting Aug. 3, 1988 under the Family Code, marriage in the Philippines is governed by the Absolute Community of Property (ACP). Under this law, the husband and wife become co-owners of all the properties they bring into the marriage and those they acquire during the marriage. This means that even those that you inherited from your ancestors, and those you bought while still single will form part of the ACP. 

There are three exceptions to this rule:

1. Properties acquired during the marriage by gratuitous title or, in layman’s language, donation given to either spouse, except if the donor stipulates that the donation also forms part of the ACP. 

I’ve heard of wealthy families donating to their child after the wedding in order to keep the ownership exclusive to the child. 

2. Property for personal and exclusive use. 

Of course, your clothes, underwear, etc. do not have to form part of the ACP anymore; it’s not hygienic. Note however that jewelry forms part of ACP. Expensive bags are not yet considered jewelry so those still go to your personal property.

3. Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage and the fruits or income of such property.

Given the above, it is best for spouses and would-be spouses to sit down, understand and acknowledge the laws governing their marriage. No amount of “What is hers is hers alone” or “I don’t meddle with the properties that he inherited from his family” will do, because the reality is that, whether you like it or not, if you are the rightful owner of any property, you have both the privileges and obligations attached to said ownership. Moreover, the fundamental reason for our property laws is the acknowledgement that the family is the basic unit of society. And for that family to succeed, it has to know its resources and make full use of them.

Signing a pre-nuptial agreement that details everything that the couple wants is also doable. You definitely learn a lot by knowing the contents of each other’s balance sheet. But do this long before the wedding as this could be a deal breaker. Talk about it long before you book your church, wedding venue, and the many other wedding suppliers. In fact, it would even be better if this is discussed before any engagement or announcement of engagement is made.

The simple solution of a lawyer friend

Back in the 1990s, a lawyer friend was consulted by his wealthy female friend. She was going to marry her D.I. (Dance Instructor) boyfriend. She recognized the huge gap in their financial conditions and wanted to protect herself, particularly the properties she inherited from her parents and grandparents, and also the assets she accumulated by herself. 

Even if she was convinced that her boyfriend was not just after her wealth, she knew too well from many pre-nup stories that it could be a deal-breaker if the discussions become too detailed and emotional. She was concerned and wanted to make sure that she wouldn’t hurt the D.I.’s feelings when she asks him to sign a pre-nuptial agreement.

My lawyer friend gave her this simple yet brilliant advice: Just sign an agreement that simply states, “This marriage shall be governed by the Conjugal Partnership of Gains.” 

Clear and simple, no need to enumerate which property goes to what pool, and it eliminated the risk of hurting anyone due to sensitivities of discussing issues about money.

We don’t know for sure what transpired in the high-profile break-up of the celebrity couple, but one thing’s for sure, any couple getting married is better off talking about money, transparent enough to not just open their hearts to one another, but to also open their balance sheets to each other! 

Happy Valentine’s Day to all of you.

If you want to read more about this topic, click Financial checklist before getting married (applicable also to those already married), There is romance in asset allocation!, Should you talk about money while dating? Tips on how to know If you're financially compatible, How to manage your money when married? Tips on how to become financially intimate!

ANNOUNCEMENTS:

1. Why not add “Let’s take the FQ Test together, Honey!” as part of your Valentine date so you already introduce the exercise of getting to know you financially early on in your dating life. Here’s the link. 

2. If you want to give your Valentine the gift of High FQ, get your copy of any or all of the FQ Books, just go to our FQ Mom Bookstore. 

This article is also published in FQMom.com.