In the Philippines, the relationship between spouses is not only personal but also financial. The law governing the ownership and management of property within a marriage is known as the Property Regime. This regime dictates how assets and liabilities are treated during the marriage and how they are to be divided upon its dissolution. This article provides a comprehensive overview of the different property regimes recognized under the Family Code of the Philippines, as well as the rules governing their establishment, modification, and dissolution.

1. The Legal Framework: Family Code of the Philippines

The Family Code of the Philippines, which took effect on August 3, 1988, governs the property relations of all marriages celebrated from that date onwards. For marriages solemnized before this date, the provisions of the old Civil Code still apply, with the conjugal partnership of gains being the default regime.

A property regime can be established in three ways:

1. By agreement in a marriage settlement (pre-nuptial agreement).
2. By the provisions of the Family Code, in the absence of a marriage settlement.
3. By local customs.

2. Types of Property Regimes

The Family Code recognizes four principal property regimes, each with its own set of rules.

a. Absolute Community of Property (ACP) – The Default Regime

For marriages celebrated on or after August 3, 1988, in the absence of a pre-nuptial agreement, the default property regime is the Absolute Community of Property (ACP). This is a system where all properties owned by the spouses at the time of the marriage, as well as those acquired thereafter, become a single common fund.

• What is Included? The community property includes all properties owned by the spouses at the time of the marriage, as well as those acquired during the marriage, from whatever source.
• What is Excluded? The following are excluded from the ACP:
  • Property acquired during the marriage by gratuitous title (e.g., inheritance or donation) by either spouse.
  • Property for personal and exclusive use of either spouse, except jewelry.
  • Property acquired before the marriage by either spouse who has legitimate descendants from a previous marriage.
• Administration and Disposition: The administration and enjoyment of the community property belong to both spouses jointly. Neither spouse can dispose of or encumber the community property without the consent of the other.

b. Conjugal Partnership of Gains (CPG)

The CPG is the default regime for marriages celebrated before August 3, 1988. It can also be chosen by couples in a marriage settlement. In this regime, the spouses maintain separate ownership of properties brought into the marriage, but the income and gains derived from these properties, as well as all properties acquired during the marriage, are shared.

• What is Included? The conjugal property includes:
  • Income and fruits from the spouses’ separate properties.
  • Properties acquired by onerous title (e.g., through a sale) during the marriage, whether the acquisition is for the partnership or for one spouse.
  • Properties acquired by labor, industry, or profession of either spouse.
• What is Excluded? The following are considered the exclusive property of each spouse:
  • Property brought into the marriage.
  • Property acquired during the marriage by gratuitous title.
  • Property acquired by right of redemption, by barter, or by exchange with exclusive property.
  • Properties purchased with exclusive money.

c. Complete Separation of Property

This regime is established by a pre-nuptial agreement. It can also be ordered by the court under certain conditions, such as during a legal separation. Under this regime, the spouses’ properties remain separate and distinct.

• Administration and Enjoyment: Each spouse owns, disposes of, possesses, administers, and enjoys his or her own exclusive property without the consent of the other.
• Liabilities: Each spouse is responsible for their own personal debts and obligations.

d. Regime of Co-Ownership

This applies to couples who are legally cohabiting without the benefit of marriage, as well as in cases where a void marriage is declared. In these instances, the properties acquired during their cohabitation are owned by them in equal shares.

3. Marriage Settlements (Pre-Nuptial Agreements)

A marriage settlement is a contract executed before the marriage, where the couple agrees to a specific property regime. This agreement must be in writing and signed by both parties. It is a legally binding document that can override the default property regime.

• Validity: To be valid, the marriage settlement must be executed before the celebration of the marriage. It takes effect at the precise moment the marriage is celebrated.
• Minority: A minor can enter into a marriage settlement, provided they are assisted by their parents or guardian.

4. Dissolution of the Property Regime

A property regime can be dissolved for several reasons:

• Death of a spouse: The death of either spouse automatically dissolves the property regime.
• Annulment or Declaration of Nullity: A final judgment declaring the marriage void or annulling it dissolves the property regime.
• Legal Separation: A final decree of legal separation dissolves the property regime.
• Judicial Separation of Property: Either spouse can file a petition in court for a judicial separation of property under specific grounds, such as when one spouse is a habitual alcoholic or has abandoned the other for a year or more.

5. Legal Effects of Dissolution

Upon the dissolution of the property regime, the following steps are generally taken:

1. Inventory of Assets and Liabilities: A complete inventory of all community or conjugal properties and their liabilities is prepared.
2. Payment of Debts: All debts and obligations are paid from the community or conjugal funds.
3. Liquidation and Division: The net assets are then divided equally between the spouses.

In the case of a legal separation, the guilty spouse may have their share of the net profits forfeited in favor of the innocent spouse or the common children.

Conclusion

Understanding the property regime is a fundamental aspect of marriage in the Philippines. Whether through a marriage settlement or by default, the chosen regime has profound implications for a couple’s finances during their marriage and after its dissolution. Seeking legal advice is highly recommended for couples who wish to establish a specific regime or who are facing the dissolution of their marriage, to ensure their rights and assets are properly protected.

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Disclaimer: This article is for informational purposes only and isn’t a substitute for professional legal advice. If you need personalized guidance, it’s always best to consult with a lawyer.