Marital agreement: a simple and practical introduction, basic principles under Norwegian law
Under Norwegian law, the general rule is that the spouses’ assets are to be divided equally upon divorce or death, unless otherwise agreed. A marital agreement gives spouses clear control over assets in the event of divorce or death. For you as an entrepreneur or owner of a business, a marital agreement with separate property can secure shares, intellectual property rights and family property, without unnecessary risk to the company.
What is a marital agreement?
A marital agreement is a written agreement between spouses (or engaged persons) concerning the division of assets: what is to be community property and what is to be separate property. Community property means that the assets are to be divided equally in a settlement, whereas separate property means that the assets are kept outside the division. A good marital agreement creates predictability, reduces conflicts and can be adapted to both family life and business.
A marital agreement is particularly relevant for:
- Entrepreneurs and owners of businesses
- Spouses with children from previous relationships
- In the case of inheritance or gifts, especially if the donor wishes separate property
- When starting up or expanding a business
- When purchasing a home, cabin or other high-value assets
A marital agreement provides security and predictability in the event of a relationship breakdown and death. It can shield business values such as shares, intellectual property rights (IP) and operating assets from division, ensure that inheritance and gifts are handled correctly (either as separate property or under the statutory rules on unequal division), and create predictability for investors so that private financial claims do not destabilise the company.
- Full separate property: Everything you own is kept outside the division. Suitable for spouses with substantial business assets or a complex ownership structure.
- Partial separate property: Selected assets (e.g. shares, a cabin and inherited funds) are made separate property. Such a solution is a common solution for entrepreneurs holding shares in their own company that has been started during the marriage.
- Separate property while both are alive, community property upon death: Separate property applies while both are alive, but becomes community property upon death. Provides a balance between protection of the business and inheritance law considerations.
- Unequal division (adjustment): The spouses may agree that the statutory rules on unequal division shall not apply (in whole or in part) or to make specific assets separate property.
- Gifts between spouses: Larger gifts must be given in the form of a marital agreement. In the event of transfer of real property, the marital agreement should in addition be registered in the Land Register.
- Undivided estate with separate property: The surviving spouse may obtain the right to an undivided estate including separate property if this has been agreed in the marital agreement or if there is consent from the heirs.
- Compensation and balanced clauses: Avoid pure transfer clauses that automatically give the other spouse separate property assets in the event of a break-up. Instead, consider time-limited separate property (step-down) or compensation clauses that take account of effort and joint funds. An example of a compensation clause is: “If community property funds are used to increase the value of a separate property asset, the other spouse is entitled to compensation corresponding to the increase in value at the time of settlement.”
- Copyright is normally kept outside the division in a settlement between spouses, cf. the Copyright Act section 76. Other intellectual property rights, such as patents, trademarks and designs, may be agreed to be separate property and included in the settlement unless they are specifically exempted. It is important to specify in the marital agreement which rights are to be separate property.
It is important to be aware that the courts may set aside unreasonable agreements, but the threshold is high and there must be clear cases of unreasonableness. The fact that an entrepreneur’s business is made his or her separate property is not in itself a ground for finding unreasonableness, regardless of a high valuation in a settlement situation. There may be other circumstances, such as that it has been a joint project without this being reflected in the registered ownership, which justify a finding of unreasonableness.
Pursuant to section 42 of the Marriage Act, the spouses may in a marital agreement agree that what they own or later acquire shall be excluded from division (separate property). Assets may thus be made separate property. This means that intellectual property rights and copyright that fall within the spouse’s disposable portion of the estate may be made his or her separate property. For copyright, this also follows from section 76 of the Copyright Act, which provides that a spouse has exclusive control over his or her copyright. If the spouses divide community property while both are alive, the copyright shall be kept outside. These assets may also, in certain cases, be covered by the rules on unequal division in section 61(c) of the Marriage Act, if they cannot be transferred or are of a “personal nature”.
However, we would point out that, pursuant to section 75 of the Copyright Act, upon the right holder’s death the rules on inheritance, the spouses’ community property and the surviving spouse’s right to an undivided estate apply. This means that the deceased (right holder) may dispose of the copyright in a will, subject to the limitations laid down by law (for example spousal inheritance and the compulsory portion to direct descendants). The deceased may also in a will restrict the exercise of the copyright.
For spouses where one or both have a start-up company or business activities, the need for a clear marital agreement increases. We have listed some points that can be included in the marital agreement:
- Shares and all “descendants” (new issues, bonus shares, mergers/demergers, holding company, consideration on sale) as separate property.
- Existing and new IP (patents, copyright, know-how, databases) and licence/assignment consideration as separate property.
- Clarify the use of private capital for the company, and document loans/contributions on an ongoing basis.
- Agree whether the other spouse may have a right to compensation where community property funds or significant effort increase the value of separate property.
- Ensure that separate property “follows” through reorganisations and group structures.
Formal requirements
- The marital agreement must be in writing.
- Both spouses must sign in the presence of two witnesses who also sign.
Legal protection
- Register the marital agreement in the Marital Agreement Register (Ektepaktregisteret) for protection against creditors.
- If real property is transferred, this must be registered in the Land Register. Other assets follow their own registration rules.
Lack of formal requirements
- Failure to comply with the formal requirements may render the marital agreement invalid.
Amendments
- Amendments are made in a new marital agreement.
Time of effect
- Effect between the spouses from signing; protection against creditors only upon registration.
Read more: Brækhus’ expertise in family and inheritance law
Checklist before you sign a marital agreement
Before the marital agreement is signed, the spouses should first obtain an overview of all assets they own, such as a home, cabin, shares, options, intellectual property rights and savings. It is important to determine which assets are to be separate property and which are to be community property, and to be as specific as possible in this assessment. Furthermore, it should be considered whether it is relevant to agree on unequal division for inheritance or gifts, so that these funds can be kept outside a future settlement. The spouses must also clarify whether a right to an undivided estate is to be granted, and which inheritance law solution is desired. If the marital agreement involves transfer of real property or other assets that must be registered, registration must be planned in order to ensure legal protection. Finally, it must be ensured that all formal requirements are fulfilled, including correct witnessing and signing by both spouses in the presence of two witnesses.
Contact us for assistance
A marital agreement gives you the opportunity to determine the allocation of assets if the marriage ends or upon death. With a clear marital agreement you obtain security and predictability, and it may be crucial in ensuring that certain assets are kept outside the divorce settlement. Fill in the form or contact us directly for assistance if you wish to secure a robust solution.
