How to divide businesses, real estate, and investments in a divorce

The division of marital property for high-net-worth individuals requires a much more rigorous analysis than that of ordinary family assets.

When a marriage has accumulated companies, real estate of significant value, financial portfolios, shares in family businesses, assets abroad or complex asset structures, the division cannot be approached as a simple sum of assets and debts.

The legal basis remains the same: the community property regime makes common the profits or benefits obtained by either spouse and, once dissolved, its assets are divided in half.

However, arriving at that result requires first precisely defining what constitutes the assets, what should be considered the company's debt, and what credits exist between the separate property of each spouse and the community property.

In cases of high net worth, the core of the conflict usually lies in the classification of assets , in the traceability of the money used to acquire or improve them, and in the correct valuation of assets that do not allow for a simple material division , as is the case with an operating company or a corporate portfolio.

Whoever plans that initial phase poorly is at a disadvantage from the start.

What does it mean to divide marital property when the assets are high?

It is important to distinguish between two moments that are often confused. The dissolution of the community property regime is one thing, and its liquidation is another.

The Civil Code establishes that the company is automatically dissolved, among other circumstances:

• When a marriage is dissolved.
• When it is declared null.
• When the legal separation is agreed upon.

That does not mean that the assets have already been distributed.

From that moment the phase begins in which the marital property must be identified, the liabilities cleared, the reimbursement credits incorporated and the net worth to be divided between the spouses formed.

In a divorce involving high assets, this distinction has immediate consequences.

The fact that the marriage has ended does not, in itself, resolve the issue:

• Who retains control of a company.
• How is the contribution of private funds to a common asset compensated?
• What treatment applies to investments acquired with mixed money?

The liquidation is the moment when all of that is legally ordered.

Separate property and community property: the true starting point

Article 1346 of the Civil Code lists the separate property of each spouse. These include:

• They already belonged to him when the society began.
• It is then acquired by free title, such as inheritance or donation.
• Purchased at the expense of or in substitution for private property.

Article 1347, for its part, considers the following to be community property :

• Earned through the work or industry of either spouse.
• Fruits, income and interest from separate or community property.
• Acquired for valuable consideration using common funds.
• Companies and establishments founded during the existence of the company at the expense of common assets.

A property inherited by one spouse generally remains their separate property . However, it is a different matter if work, amortizations, or investments have been made on that property using community funds.

A company created before marriage may remain separate property in its origin, but the subsequent entry of common funds, the expansion of the business or the acquisition of new shares during the validity of the regime can open a much more complex discussion.

The same applies to investment portfolios that have been fueled for years from accounts that have mixed professional income, dividends, and privately sourced funds.

When separate and community funds are mixed

In high-net-worth individuals, the most intense conflicts tend to arise when the origin of the money is not linear.

The Civil Code expressly provides that assets acquired with a price or consideration that is partly community property and partly separate property belong jointly to the partnership and to the spouse or spouses in proportion to the value of their respective contributions.

Furthermore, when an asset retains its separate or community property character regardless of the origin of the money used to acquire it, the amount paid by the other estate must be reimbursed, updated to the time of liquidation.

Family businesses, shareholdings and going concerns

A company is the asset that least tolerates a hasty liquidation. A poorly planned distribution can drain a profitable business of its value, create corporate gridlock, or devalue the asset precisely when it should be preserved.

The Civil Code recognizes each spouse's right to have the economic exploitation that they effectively manage and the premises where they have been practicing their profession included preferentially in their assets, up to the extent of their share.

This legal criterion aligns with a basic idea regarding large fortunes; there are assets whose value depends on the continuity of:

• His management.
• Maintaining control.
• Business stability.

Therefore, when the marital estate includes shares, company shares, offices, clinics, hotel operations or holding companies, the liquidation must consider not only their theoretical value, but also the effect that each allocation would have on the actual functioning of the asset.

The legally correct distribution does not always coincide with the most economically sensible distribution.

What assets are included in the assets of the community property regime

Article 1397 of the Civil Code establishes that the assets must include:

• The marital property existing at the time of dissolution.
• The updated amount of the value of the assets disposed of through illegal or fraudulent business if they were not recovered.
• The updated amount of the sums paid by the company that were the sole responsibility of one of the spouses.

After making the legally applicable deductions, the remaining amount constitutes the company's assets and is divided in half.

This point deserves special attention when one of the spouses has operated with greater control over the family assets.

In high-net-worth individuals, it is relatively common to find an information asymmetry: one person knows the details of the companies, the accounts, the financial positions and the investment decisions, while the other only has a partial view.

The right to information, obtaining documents, and reconstructing the inventory are not minor steps.

Without that foundation, the abstract half recognized by law can fall far short of the real half of the common patrimony.

Division of marital property in international marriages or marriages with assets in several countries

In an international divorce involving high-net-worth individuals , the division of assets cannot be examined solely under the Spanish Civil Code. It is first necessary to determine which law governs the matrimonial property regime.

Regulation (EU) 2016/1103 , applicable since 29 January 2019 in the Member States participating in enhanced cooperation - including Spain - deals with jurisdiction, applicable law and the recognition and enforcement of decisions in matters of matrimonial property regimes.

The regulation itself states that its scope includes both the day-to-day administration of marital property and the liquidation of the regime, and seeks to bring together in a single instrument the applicable rules to provide legal certainty to marriages with cross-border repercussions.

When there are properties outside of Spain , accounts in other jurisdictions, foreign companies or spouses with different nationality or residence, the most costly mistake is usually to dispute the distribution before having established the applicable law.

In these types of cases, the asset strategy begins with determining the court's jurisdiction and the applicable matrimonial property regime. Everything else is built from there.

How to approach the division of marital property for high-net-worth individuals

In these types of proceedings, the division of assets should not be treated as a simple phase following the divorce. It is a matter in its own right.

It requires an orderly review of the origin of the assets, the flow of funds, the corporate structure, the charges, the taxation associated with certain awards and the impact that each decision may have on the conservation of the heritage.

A large estate is protected with inventory, solid documentary evidence, technically defensible valuations, and a clear vision of which assets should be allocated, which should be compensated, and where there may be a repayment credit that substantially alters the final result.

This is the area where a division of marital property involving companies, real estate, and investments ceases to be a mere formality and becomes a matter of genuine legal asset strategy.

Conclusion

The division of marital property for high-net-worth individuals requires technical precision from the very first step.

The Civil Code provides the legal structure: it defines what is separate property, what is community property, when the partnership ends, what constitutes the assets, and how the assets to be divided should be formed.

What determines the economic outcome of the matter is something else: the ability to prove the origin of the funds, detect loans between estates, correctly value the assets, and design allocations compatible with preserving value.

These matters require legal judgment, economic knowledge, and a thorough understanding of the marital property structure.

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RRYP Global, lawyers for the international liquidation of marital property and international divorce in Spain.