Insights

How to Avoid Personal Property to Common Property in Ningbo

Ningbo Author：LuXu WANG

Mr. Zhao bought a house with full payment before marriage. After marriage, he sold the old house to buy a new house due to the family's need, and bought a new house after mixing the house sale price with the couple's joint deposit. During the divorce, the wife claimed that the newly purchased house was marital property, but Mr. Zhao was unable to prove the source of the funds used to purchase it. Ultimately, the court ruled that the house should be divided as joint property. First give the conclusion: if the personal property before marriage remains independent, does not mix, does not take the initiative to change the ownership, in principle, it is still personal property. The secret of keeping personal property is only four words-the source can be traced: which account the money came from, whether it was mixed with common funds, whether the ownership has changed, all of which should be documented.

1. Legal Basis: Scope and Conversion Boundaries of Personal Property

Article 1063 of the the People's Republic of China Civil Code stipulates: "The following property is the personal property of one of the spouses: (1) the premarital property of one of the (II); the compensation or compensation obtained by one of the spouses due to personal injury; the property determined to belong to only one of the (III) in the will or gift contract; the daily necessities for the exclusive use of one of the (IV); (V) other property that should belong to one of the spouse. "Article 1062 stipulates that the wages, bonuses, remuneration for labor services, income from investment in production and operation, income from intellectual property rights, inherited or donated property (except as stipulated in item 3 of Article 1063) earned by the husband and wife during the marriage relationship shall be the joint property of the husband and wife. Personal property shall not be automatically "confiscated" due to the continuation of marriage: Article 31 of the (I) of the Supreme People's Court on the Interpretation of the Marriage and Family Code of the the People's Republic of China Civil Code clearly states that Article 1063 of the Civil Code stipulates that the personal property of one spouse shall not be converted into the joint property of the husband and wife due to the continuation of the marriage relationship, unless otherwise agreed by the parties.

There are three channels through which the transformation takes place: first, property agreement. According to Article 1065 of the Civil Code, both men and women can agree in writing that the pre-marital property and post-marital income shall be owned by themselves, jointly owned or partially owned by each other, and agree to change the default rules; second, gift, personal property is transferred to the spouse through gift (including name addition, transfer and transfer), and the ownership is changed accordingly, the gift of real estate cannot be revoked arbitrarily after the transfer of ownership; Third, mixing, personal property and common property are deposited in the same account, the source cannot be distinguished, or after the sale of personal property, the sale of housing funds and common deposits are mixed and repurchased, the court can only deal with the common property-the case of Mr. Zhao at the beginning is typical of the third situation. By understanding these three channels of transformation, we understand the full focus of "avoiding the transformation of personal property into common property.

Breakdown of 2. income attribution: fruits, natural value added and operating income

How the “proceeds” of an individual’s property acquired after marriage are characterized directly affects the integrity of the property boundaries. Article 26 of the (I) on the Interpretation of Marriage and Family stipulates: "The income generated by the personal property of one of the spouses after marriage, in addition to the fruits and natural appreciation, shall be recognized as the joint property of the husband and wife. "Breakdown by this rule:

  1. Interest belongs to individuals: passive income such as deposit interest, national debt interest and rent (the common understanding of natural interest and legal interest), which are still personal property in principle; but it should be noted that if the rental of a house is accompanied by continuous management investment, there are opinions in judicial practice that its nature is closer to the operating income, and the rent may be recognized as common property with different standards, it is prudent to pool and retain management cost vouchers in separate accounts.
  2. natural value-added belongs to individuals: the value-added of real estate due to the rising market before marriage belongs to the natural value-added of personal property as long as it is not invested in common property for reinvestment or operation.
  3. the active operating income belongs to the common: the income generated by the continuous trading of the stock before marriage, the profit generated by the company before marriage and after marriage, and the return of personal property invested in business activities belong to the "income obtained by investment", which is recognized as the common property.
  4. Mixed operation leads to the overall transformation: if the pre-marital deposit and the post-marital salary are kept in the same account and can not be distinguished, the court may treat them as the common property as a whole; if the house sale money after the pre-marital real estate is sold is mixed with the common deposit, the new house will be divided according to the common property (the proportion can be determined according to the contribution of capital contribution).

Ms. Zhang had a deposit of 600000 yuan and a stock account market value of 400000 yuan before marriage. Marital wages are deposited in the same bank card, and the stock account continues to trade and additional marital funds are added. In the event of divorce, the court shall treat the funds in the bank card as common property because it is unable to distinguish the source of pre-marriage and post-marriage; for stock accounts, the portion corresponding to the principal of 400000 yuan before marriage may be claimed as personal property, but the value-added portion corresponding to the proceeds of post-marital transactions and additional funds shall be divided as common property. If Ms. Zhang opened a separate account before marriage, saved her salary after marriage, and her stock account only went out, the conclusion would be completely different.

Validity and boundary of 3. property agreement

Article 1065 of the Civil Code allows husband and wife to make a written agreement on property ownership, which is binding on both parties. There are four practical points: first, it must be written and oral agreement will not be effective; Second, the content is clear, specifying the specific property (real estate location, account number and share), and it is easy to create ambiguity by writing "each property belongs to each other" in general; Third, if changes in real property rights such as real estate are involved, registration shall be handled in a timely manner-according to Article 658 of the Civil Code, the donor may revoke the gift before the right is transferred, however, with the exception of notarized gift contracts, this means that if one party's property is owned by the other party within the marriage agreement, the donor can still theoretically revoke it if it has not been transferred and notarized. Fourth, the agreement shall not be against a bona fide third party. When it comes to external debts, creditors who do not know the agreement can still claim to both husband and wife (see the third paragraph of Article 1065 of the Civil Code for details). Turning "verbal" into "written notarization transfer" is a three-step complete action for the landing of property agreements.

Segregation of 4. Inheritance and Gifted Property

The property inherited or donated during the existence of marriage belongs to the common property of husband and wife in principle, which is the "hidden transformation" channel that many families ignore. There are three isolation arrangements: first, when parents make a will, they make it clear that "the estate belongs only to my children and has nothing to do with their spouses". according to item 3 of article 1063 of the civil code, the will determines that the property belonging only to one party is personal property; Second, when parents give large sums of money or real estate to their children, they should state "only give to XXX individuals" in the gift contract or transfer remarks and notarize them as much as possible; third, the recipient party deposits the money into a separate account and does not mix it with household expenses. It should be reminded that "parental transfer" alone is not enough to prove that only one party is given, and the written meaning is the key-this is the extension of the principle of "traceability" in the inheritance and donation scenarios.

5. common mistakes

  • Misunderstanding 1: Premarital property will automatically become common property after many years of marriage. Positive Solution: Personal property is not automatically transformed due to the continuation of marriage (Article 31 of the (I) of Interpretation). Only active disposition, mixing or agreement will change the nature.
  • Misunderstanding 2: The property can be revoked at any time if it is named. Positive solution: After the name is added or the transfer of ownership, the gift is completed and the real right has been transferred, which cannot be revoked unilaterally; if the transfer of ownership is only promised in writing, the notarized gift is irrevocable, and the gift without notarization can be revoked according to law.
  • Misunderstanding 3: Stocks before marriage will not change if they do not move after marriage. Positive Solution: The stock before marriage is not operated at all after marriage, and its natural appreciation belongs to personal property; but if you continue to buy and sell or inject funds after marriage, the transaction income and the new part may be converted into common property.
  • Myth 4: It's okay to put one account for pre-marital savings and post-marital wages. Positive solution: After mixing, the source cannot be distinguished. When divorcing, the court may treat it as common property as a whole. Opening a separate account for premarital deposits is the most basic isolation action.
  • Myth 5: Of course, the money my parents transferred to me is personal property. positive solution: in principle, the property granted during the marriage is common property, unless the gift contract or will clearly belongs to the property of only one party, note "only for individual" and keep the written materials when transferring the money, then the personal property can be maintained.

6. Checklist of evidence and action items for daily property management

"source traceability" is not something to be done in litigation, but a habit of daily management. The action list is arranged according to the time axis: before marriage, deposit, stock and financial management will be opened separately, screenshots or statements of the time balance of premarital assets will be filed, and the real estate will keep the original purchase contract, payment voucher and warrant. After marriage, the income after marriage will enter another account, and no funds will be injected into the pre-marital account. When it is really necessary to use the pre-marital funds, the source and purpose will be indicated, the whole process of purchasing a house is paid with special account funds and the contract, invoice and running water are kept, which can prove the closed loop of "selling the old and buying the new". When receiving donation and inheritance, parents are required to state "only for XXX individuals" in the transfer remarks and keep a written explanation. The will clearly states that the estate belongs to the children and keeps the file in time. Every year, make an inventory update of the family property list and file the source vouchers of the new property. On the evidence list, six categories are focused on keeping: bank flow and statements, securities and fund account records, real estate contracts and payment vouchers, gift and will documents, tax payment vouchers, and family property lists (preferably signed by both parties). Two common mistakes deserve special attention: First, treating a pre-marital account as a “shared family wallet” and depositing post-marital wages into it, resulting in a complete commingling of assets. Second, after receiving the proceeds from a property sale, using them to cover other joint expenses before purchasing a new home, which severs the financial link and makes it impossible to prove the transaction’s nature as a property exchange. Once these two types of mistakes occur, there is almost no remedy in litigation and can only be isolated in advance.

case reference: in the case of property dispute after the divorce between dai a and dai B, the defendant's premarital building was rebuilt and lost after marriage, and the court determined that the rebuilt house was the common property of husband and wife, and the other party had the right to share the compensation rights and interests of demolition and resettlement, and decided to share the corresponding area. It can be seen that pre-marital property may be transformed into common property once it is rebuilt, replaced, sold and repurchased after marriage. Trial Court: Case No. of Yinzhou District People's Court of Ningbo City, Zhejiang Province:(2015) Yong Yin Wang Min Chu Zi No. 154

7. FAQ

The property before marriage is sold for a new house after marriage. How can we keep the property of personal property?

The house sales funds are stored separately and earmarked for exclusive use. When buying a house again, the whole process is paid with the account funds and the complete chain of the house purchase contract, payment voucher and bank flow is kept to avoid mixing with the joint deposit after marriage. If the new house is still registered in my name, it can be claimed as the replacement and continuation of personal property, but the burden of proof is on the party claiming it, and it is difficult to prove once the capital chain.

Is the rental income from a property owned before marriage considered joint marital property if it is rented out after marriage?

According to Article 26 of the (I) of Interpretation, the fruits belong to the individual in principle; but the rent has the tendency to be recognized as the operating income in the judicial practice, especially the rent which needs continuous management investment. It is prudent to enter rent into a separate account and retain management expenditure vouchers, and to combine management input claims when the lawsuit is involved.

Do you need to notarize the personal property agreed to be jointly owned within marriage?

The Civil Code only requires a written form; notarization is not a condition for the validity of the agreement. However, where the transaction involves a gift and the property has not yet been transferred, notarization can preclude the right of unilateral revocation. For adding a name to the property title, it is more prudent to directly proceed with the transfer registration.

If you repay your spouse's debt with your pre-marital savings, can you get your divorce back?

can be claimed. If one party pays off the joint debt after marriage with the personal property before marriage, he may claim compensation at the time of divorce; if the personal debt of the other party is paid off, he may claim return or recovery according to the gift or loan relationship, and the key is to retain the source and purpose of the repayment funds.

How to retain personal attributes when using pre-marital savings to exchange large assets for the family during marriage?

Those who can prove that the funds are entirely from the pre-marital account and keep the complete chain, can claim the rights and interests corresponding to this part of the capital contribution; however, if large assets (real estate, vehicles) are registered in the names of both husband and wife, they are generally treated as common property, and can only claim more points or compensation in combination with the capital contribution. To fully preserve the personal nature of your contributions, it is best to clearly specify their nature and ownership in writing at the time of funding.

The other party unilaterally transferred my premarital savings—can I get it back?

can be claimed. First fixed transfer flow and account balance changes, clear pre-marital personal attributes of the money, and then according to unjust enrichment or infringement claims return.

Practical experience of 8. lawyers

To keep personal property, in the final analysis, there is only one word-the source can be traced. A house purchased in full before marriage, or money inherited or gifted with the explicit stipulation that it belongs solely to one spouse, is originally considered individual property. However, once you commingle such assets with marital funds, or voluntarily change the ownership, their legal nature may be altered. In practice, the most common case of car rollover is to sell the premarital property, the house price is put into the joint account of the husband and wife, and then use the money to buy a new house. As a result, it is no longer clear which part of your premarital property belongs to you. The key to avoiding transformation is to let the money go through an independent channel from the beginning, instead of waiting for problems to recall.

In terms of specific practices, it is best to store personal property in a special account. After selling personal property, purchase a house separately, and reflect the source of funds in the contract and transfer notes. The attribution of income should also be clearly defined: interest on deposits and natural appreciation of real estate usually follow the principal, while the income from business and investment after marriage tends to be recognized as common property, and do not confuse the two. As for the marital property agreement, it can play a role in clarifying the boundary, but the scope and ownership of the property should be clearly written, and not just a general sentence of "each property belongs to each other". The more specific it is, the less likely it will be overturned in the future.

If a mix-up has occurred, it is not without room for remediation. You can start with bank flow, purchase contracts, invoices and loan repayment records, and try to restore the entry path and proportion of personal funds. If you can prove that a certain part of the corresponding personal property is still personal property, you can strive to keep it in the division. When negotiating, the most common thing the other party does is to equate "mixing accounts" with "all in common", and you have to refute it with a line of funds that can be checked. At the same time, we should also be on guard: during the negotiation, we should not spread out our account details and family assets at one time, so as to prevent the other party from laying out according to your base.

the boundary between personal property and common property is essentially "the boundary of evidence". The law gives you an exemption clause-no agreement, no gift, no mixing, no conversion, but the evidence will not be generated by itself: pre-marital deposit is opened separately, the pre-marital real estate retains the original certificate, the whole process of sale and replacement is earmarked, the parents' large amount of support is written and noted "only for individuals", and the inheritance arrangement is directed in advance with a will. For Ningbo families, real estate accounts for a very high proportion of family assets. A mixed house purchase may change the nature of millions of assets. It is much cheaper to put these actions ahead than to fight a lawsuit of "proving that the money is mine" in divorce.

Another carrier of property isolation that is often ignored is insurance and precious metals: the wealth management insurance policy insured before marriage. If you continue to pay the renewal premium after marriage, if the renewal premium comes from common property, the corresponding cash value and income of this part may be identified as common; if the value of physical precious metals and collectibles before marriage increases after marriage, the natural value-added part belongs to the individual, however, the old problem of "traceability" will be returned to when it is mixed with common funds. There is always only one principle: any personal property in the use, replacement, value-added moment, must leave "this money is my pre-marital/personal funds" written and flowing evidence.