Equalisation of accrued gains on divorce: calculating house, remaining loan and repayment correctly

Basic principle: what the equalisation of accrued gains actually equalises

Without a marriage contract, spouses live in the statutory matrimonial property regime of the community of accrued gains (Zugewinngemeinschaft) (§ 1363 BGB). Contrary to a widespread misunderstanding, this does not create joint assets: each spouse remains the owner of what belongs to them. Only when the property regime ends, for example through divorce, are the accrued gains achieved during the marriage equalised.

Accrued gain is the amount by which the final assets (Endvermögen) exceed the initial assets (Anfangsvermögen) of a spouse (§ 1373 BGB). Both accrued gains are compared. Whoever achieved the higher accrued gain owes the other half of the surplus as an equalisation claim (§ 1378 BGB).

Important: the equalisation of accrued gains is purely a monetary claim. The house itself does not automatically change owner through the equalisation and is not split in half. It is merely entered into the asset balance at its value. Who legally owns the house is recorded in the land register and is, for now, to be considered separately.

Initial assets, final assets and the correct cut-off dates

For each spouse, two asset positions are set against each other:

• Initial assets (Anfangsvermögen) are the assets after deducting liabilities at the start of the property regime, that is, as a rule on the day of the marriage (§ 1374 para. 1 BGB). They can also be negative if debts predominated.
• Final assets (Endvermögen) are the assets after deducting liabilities when the property regime ends (§ 1375 para. 1 BGB).

In a divorce, an important particularity applies to the cut-off date: for calculating the accrued gain and the amount of the equalisation claim, the end of the property regime is replaced by the point of the filing of the divorce petition becoming pending (Rechtshängigkeit), that is, the service of the petition on the other spouse (§ 1384 BGB). Accordingly, the decisive point is, as a rule, not the date of separation and not the day of the divorce, but this procedural cut-off date.

Both asset positions include all assets and liabilities respectively, that is, credit balances, valuables and properties as well as outstanding loans.

The house in the balance: market value minus remaining loan

In the equalisation of accrued gains, a property is not entered at the old purchase price and not at the assessed tax value, but at its market value on the cut-off date (§ 1376 BGB). This is the value that could realistically be achieved on the open market at that point in time.

On the other side stands the loan. The remaining loan still outstanding on the cut-off date is deducted as a liability. What remains is the net value decisive for the calculation:

Market value on the cut-off date minus remaining loan = net value of the property

If the house belongs to both spouses in equal halves, this net value is allocated proportionally to their respective assets. If it belongs to only one, the full net value feeds into that person's assets. This is precisely why an appropriate, neutral valuation as at the correct cut-off date is so decisive: even a deviation of a few percentage points in the market value can shift the equalisation claim noticeably.

How repayment during the marriage increases the accrued gain

Every repayment (Tilgung) reduces the remaining loan. As the remaining loan falls, the net value of the property rises, and with it the accrued gain on the owner's side. Through the equalisation, this increase in value indirectly benefits both spouses.

A simplified example illustrates this. One spouse is sole owner:

• At the marriage: house 300,000 euros, remaining loan 280,000 euros, that is, a net value of 20,000 euros in the initial assets.
• On the cut-off date: house 350,000 euros, remaining loan 200,000 euros, that is, a net value of 150,000 euros in the final assets.

The accrued gain from the property here amounts to 130,000 euros. Two effects are contained in this: the increase in the house's value and the repayment made. Both increase the accrued gain.

The decisive point is: for the equalisation of accrued gains it does not matter who paid the instalments during the intact marriage. A separate equalisation of individual repayment instalments does not take place within the equalisation of accrued gains. The effect of the repayment is already reflected through the increased net value.

Special case of an inherited or gifted house: privileged initial assets

Assets that a spouse acquires during the marriage through inheritance, with a view to a future right of inheritance, or through a gift are added to the initial assets (§ 1374 para. 2 BGB). This is referred to as privileged initial assets. The inherited or gifted value itself is thereby not subject to equalisation.

But take care, here lies a frequent error: only the value at the point of acquisition is privileged (§ 1376 para. 1 BGB). A later increase in value of the inherited or gifted property, by contrast, counts towards the accrued gain and is subject to equalisation.

An example: a spouse inherits a house during the marriage that is worth 200,000 euros at the point of inheritance. On the cut-off date it is worth 300,000 euros. The 200,000 euros stand as privileged initial assets, the increase in value of 100,000 euros falls within the accrued gain. For this reason too, a reliable valuation is needed both at the point of acquisition and on the cut-off date.

Loan after the separation: who pays and who is liable

Here the external and internal relationships must be distinguished. If both spouses signed the loan agreement, they are liable to the bank as joint and several debtors (§ 421 BGB). This means: the bank can call upon either of them for the full amount. A separation or divorce changes nothing about this contractual liability. A spouse is released from joint liability only if the bank expressly consents to this.

In the internal relationship between them, the following applies: if, after the separation, one party pays the instalments alone, an equalisation claim against the other may come into consideration for the period from the separation onwards (§ 426 BGB). For repayments during the intact marriage, by contrast, such a claim for reimbursement generally does not exist.

These ongoing payments must be carefully separated from the calculation of the equalisation of accrued gains. In practice both matters are often settled together, but they follow different legal bases. How exactly this is to be classified in your case should be clarified with your lawyer.

Takeover and payout or sale: what this means for the value

If the house belongs to both spouses, there are essentially two paths. In the first, one spouse takes over the house and pays the other out. The guide for the payout is the net value, that is, market value minus remaining loan, in line with the ownership shares. In practice the follow-up financing must usually be sustainable and the other spouse must be released from the loan liability, which requires the bank's consent.

In the second path, the property is sold. From the proceeds, the loan is first redeemed, and the remaining net proceeds are distributed according to the ownership shares. A sale creates clear circumstances and avoids years of joint ties to the property and the loan.

In both cases the following applies: a factually correct, comprehensible valuation as at the relevant cut-off date is the common basis. It protects against disputes over assumptions that are too high or too low and is at the same time the basis for calculating the equalisation claim. Agreements on the equalisation of accrued gains that are made during ongoing divorce proceedings must, moreover, be recorded by a notary (§ 1378 para. 3 BGB).