The long-term protection of assets should be considered during divorce proceedings.
A divorce or separation is always a difficult and emotional period. Yet important decisions on property, bank accounts, outstanding loans and insurance policies often need to be taken quickly at such a time. These are important decisions for the future. The long-term protection of assets should be considered during a divorce or separation.
Make a list of your assets
In the first stage it is important to make a list of bank accounts, and the holders, joint-holders and/or powers of attorney holders for each.
A personal bank account is managed independently of joint assets. For this type of account, the account holder is the sole signatory and has sole liability. If the spouse holds a power of attorney for this account, this should be revoked in order to avoid any unwanted transactions. A joint account is governed by the conditions in the account opening agreement. Some joint accounts require the joint signature of both account holders for any transaction (referred to as an “and” account). Other joint accounts give each individual account holder the right of disposal over any assets or securities on this account with their sole signature (an “or” account). Please note that each of the account holders is liable for any amounts owed on both types of account (joint liability).
The procedure for closing an “or” account is straightforward. You don’t even need to visit the branch to inform the bank that you wish to close the account. A freely drafted letter or a standard letter downloaded from the internet is all you need. Sign the letter and attach a copy of your identity card (both sides). Send this document by registered mail with acknowledgement of receipt to the bank. Of course, it is quicker if you drop the documents off directly in one of our branches.
Note: as a joint account is often used to pay for ongoing household costs with standing orders or direct debits for the payment of regular bills, you must arrange an alternative before closing the account.
2,143 couples got married in Luxembourg in 2019. But according to Statec statistics, 1,906 divorces were also recorded in the same period. This is taken from the document “Luxembourg in figures 2020”.
For bank cards, if your partner has a bank or credit card for your current account, the agreement between the spouse who is the cardholder and the bank should be cancelled. The card will then be deactivated.
The same rules apply to assets held in a safe deposit box as to a bank account. Either you are the sole owner of the safe deposit box and have the right to dispose of the assets held there as you please, or both partners have the same authority. In the former case, any power of attorney held by your partner can be revoked at any time. In the second case, the safe deposit box will be blocked for both owners.
What should you do about property?
The issue of property is often an emotional one during a divorce. There are several options here, as well as for any mortgages in connection with the property.
You can decide to retain ownership of the joint property and meet the mortgage payments alone. In this case, one person takes over liability for the mortgage payments and must also pay financial compensation to buy out the share of their spouse. Half of the net value of the property must be handed over. The amount payable, i.e. the share of the net value of the property, is calculated as follows:
- Estimate of the market value of the property made by an appraiser or in joint agreement by between both spouses;
- Deduction of the outstanding mortgage;
- Deduction of any personal contributions made to purchase the property;
- Division of the calculated net amount by two.
For a universal community of property regime, each loan belongs to the joint assets of the couple.
Unless the loan is converted into the name of one of the spouses, both spouses are jointly and severally liable for its repayment.
If you decide to sell the property and repay the mortgage early, the proceeds can be used to repay any outstanding amount on the loan or to buy a new property.
Of course you can also keep the property and continue to pay off the mortgage together. In this case, both spouses continue to remain jointly and severally liable for repaying the loan and in principle, the credit protection insurance continues unchanged. All documents and information regarding the loan will be sent to both parties to the agreement from this time onwards.
As well as repayment of the loan, you should also consider any insurance policies. This applies to all types of insurance, whether credit protection, buildings or family insurance cover, your banks and insurers must be informed of your new family situation.
Jointly or separately liable
As with the mortgage, you will also need to take the necessary measures regarding any personal loans if you get divorced. For a marriage under the statutory property regime, everything will depend on who signed the loan agreement. If the loan was taken out in one name, this person is solely liable, irrespective of whether the loan was taken out before or during the marriage. If the loan was taken out in joint names, it forms part of joint liabilities and both parties are liable for its repayment.
For a separation of property regime, the personal loan belongs to your private debts if taken out in your own name. If the loan was taken out in joint names and there is a joint and several liability clause in the agreement, both parties are liable for repayment of the loan.
The long-term protection of assets should be considered during a divorce or separation.
For a universal community of property regime, each loan belongs to the joint assets of the couple, even if it was taken out in the name of a single spouse. Both partners are therefore liable.