Community property of spouses

What it means

Community property of spouses (BSM in Slovakia) is the joint property that spouses acquire during marriage. It includes almost everything either of them obtains, including income from work and business, except things inherited or received as gifts and items of personal use. The spouses have no shares in it; they own all of it jointly.

What matters for entrepreneurs is that it generally also includes assets one spouse uses in business as a sole trader and an ownership interest in an s. r. o. bought with common money. Only the registered person is the shareholder, but the value of the stake belongs to the joint property.

The scope of community property can be narrowed or extended by a contract before a notary, or its creation postponed until the marriage ends. It ends on divorce, death or narrowing and is then settled by agreement or by a court, on the presumption that both spouses’ shares are equal.

How it works in practice

An entrepreneur who wants to use jointly owned property of more than negligible value in the business needs the spouse’s consent. It is usually given in writing when the business starts and matters especially for contributions to a company, mortgaging property or larger loans.

In probate proceedings the community property is settled first, and only the half that belonged to the deceased is divided among the heirs. When a sole trader or shareholder dies, the surviving spouse therefore owns neither all the assets nor the whole stake, which affects who can take over the business and who decides what.

In a sole trader’s books, jointly owned assets are recorded like other business assets. On divorce, however, their settlement can spill into the business, for example when one spouse has to buy out the other. It is sensible to keep this in mind when planning larger investments.

What to watch out for

In enforcement proceedings an entrepreneur’s creditors can, under certain conditions, reach jointly owned property too, such as a flat bought during the marriage. Anyone wanting to separate family assets from business risk should consider operating through an s. r. o. and possibly a notarial agreement narrowing the community property, and do so in good time, not once debts exist.

A creditor can challenge a narrowing done just before trouble as a voidable transaction. Transferring property to a spouse as a gift when the company can no longer pay is equally risky. A court may declare such an act ineffective against the creditors.