Disclaimer: The information provided here is for general educational purposes only and does not constitute legal advice. If you have specific concerns about prenuptial or cohabitation agreements in the Philippines, it is best to consult a qualified lawyer.

Introduction

In the Philippines, marriages and family relationships are primarily governed by the Family Code of the Philippines (Executive Order No. 209, as amended). When couples marry, they automatically fall under specific property regimes, unless they have executed a prenuptial agreement (sometimes referred to locally as a “marriage settlement”).

Asset protection is one of the key reasons couples consider entering into a prenuptial agreement. In some cases, unmarried partners who cohabit (live together without legally marrying) also wish to clarify how properties will be governed in the course of their relationship and in the event of separation. Below is a comprehensive discussion on prenuptial and cohabitation agreements in the Philippine context—focusing on their use as tools for asset protection.

1. Legal Framework for Prenuptial Agreements

1.1 Governing Law

Family Code Provisions
- The Family Code specifically allows a married couple to select a property regime different from the default regime that would otherwise apply.
- They may choose any of the following property regimes:
  - Absolute Community of Property (default if no prenuptial agreement is executed)
  - Conjugal Partnership of Gains
  - Complete Separation of Property
  - Any other regime as agreed upon by the parties, provided it is not contrary to law or public policy.
Formal Requirements under the Family Code
- The agreement must be in writing.
- It must be signed by both parties and executed before the celebration of the marriage.
- It is recommended (though not strictly required for validity between the parties themselves) to be notarized and subsequently registered in the local civil registry and in the proper registries of property (for real property) to bind third parties.

1.2 Default Property Regimes

Absolute Community of Property (ACP)
Under ACP (applied automatically if no prenuptial agreement exists and the marriage took place after the effectivity of the Family Code on August 3, 1988), almost all assets and liabilities acquired before and during the marriage become part of the community property, with some exceptions (such as personal gifts, inheritances, and personal or exclusive properties).
Conjugal Partnership of Gains (CPG)
If the couple wed before the Family Code took effect or if they agreed to adopt the CPG regime, the properties acquired by either spouse before the marriage generally remain separate. However, the fruits (income, dividends, etc.) of separate property during marriage, and all property acquired during the marriage, become part of the conjugal partnership.

1.3 Enforceability and Limitations

A prenuptial agreement that is executed in accordance with the law—validly entered into and not contrary to public policy—will be respected and enforced by Philippine courts.
Such agreement cannot include provisions that are unconscionable, immoral, or violate mandatory laws (e.g., terms diminishing spousal or child support obligations required by law).
If there are ambiguities, courts often resolve them in favor of the less dominant party to ensure fairness.

2. Asset Protection Through Prenuptial Agreements

2.1 Why Execute a Prenuptial Agreement?

Clear Property Division
- It allows each party to identify and segregate their own assets, ensuring that pre-marriage properties remain separate.
Shielding Family-Owned Businesses
- Business owners often worry about the effect of marital dissolution on corporate shares or family enterprise. A prenuptial agreement can specify that all business interests and future income therefrom remain separate property.
Minimizing Future Disputes
- It clearly spells out what is considered conjugal or community property versus separate property, reducing litigation if divorce, nullity of marriage, or separation of property ensues.
Estate Planning Considerations
- It may form part of a broader estate plan, especially if one spouse has children from a previous marriage or from other relationships.

2.2 Key Provisions to Include

Identification of Separate and Conjugal Properties
A straightforward list or definition of which properties remain separate and which become shared can help in future disputes.
Disposition of Income and Earnings
The agreement may outline how salaries, professional income, or business earnings earned during the marriage are classified.
Management and Control Clause
Clarify who manages or exercises control over certain assets.
Debts and Liabilities
Specify how debts (personal or business-related) will be handled to prevent one spouse from being automatically liable for the other’s obligations.
Dispute Resolution Method
A clause prescribing a method for dispute resolution (e.g., mediation, arbitration) can help resolve conflicts efficiently.

2.3 Validity and Potential Challenges

Voluntariness
The agreement must be entered into freely. Claims of fraud, coercion, or lack of mental capacity can render it void.
Proper Disclosure
Full and honest disclosure of each party’s assets and liabilities strengthens enforceability.
Fair and Equitable Terms
Even though the law does not require absolute equality, it does not uphold grossly one-sided arrangements.

3. Cohabitation Agreements (Live-In Agreements)

3.1 Legal Recognition

Unlike prenuptial agreements that are expressly governed by the Family Code, cohabitation or live-in agreements do not enjoy the same clear-cut statutory framework. However, Philippine law recognizes that unmarried cohabiting couples may want to define property relations and set guidelines. They do so under general principles of contract law (New Civil Code), provided the terms are not contrary to law, morals, good customs, public order, or public policy.

3.2 Purpose and Scope

A cohabitation agreement can cover:

Property Ownership: Clarification of who owns which property, both prior to and during cohabitation.
Division of Expenses: Agreement on how living expenses (rent, utilities, groceries) will be shared.
Dispute Resolution: Outline of the process if the couple separates.
Health and Insurance Provisions: Agreements on insurance coverage, medical expenses, etc.
Inheritance and Estate Plans: While cohabitation agreements cannot override laws on succession (especially mandatory heirs under Philippine law), they can guide how certain assets are used or distributed.

3.3 Asset Protection for Unmarried Couples

Contractual Clarity: By stating how assets (like real estate, bank accounts, or business interests) are split, cohabiting partners reduce the risk of conflict if they decide to go their separate ways.
Protecting Each Partner’s Contribution: Whether in cash or “sweat equity,” each partner’s contributions to jointly acquired property can be documented.
Limitations:
- Philippine law heavily protects legitimate family and marriage. Thus, no cohabitation contract may stand if it violates fundamental legal principles (e.g., no contractual “waiver” of child support obligations if children are born, no recognition akin to marriage rights).
- Courts may find certain provisions void if they are viewed as circumventing the law’s mandates on family rights and obligations.

4. Practical Considerations for Asset Protection

4.1 Registration and Notarization

Notarization: Although not required for validity between the parties themselves, notarization provides documentary authenticity and can be crucial for enforceability.
Registration:
- Prenuptial Agreements: Should ideally be registered in the local civil registry and proper registries of property to bind third parties.
- Cohabitation Agreements: Generally do not require registration but can be annotated on titles (in certain cases involving real property), ensuring that future buyers or creditors are aware of the existing agreement.

4.2 Third-Party Interests

When assets (especially real estate) are part of a prenuptial or cohabitation agreement, third parties (e.g., banks, buyers) may need notice of the arrangement to avoid disputes about ownership or control.
Failing to register can lead to complications, particularly if a party attempts to sell or mortgage property.

4.3 Tax Implications

Estate Taxes: The classification of properties as separate or conjugal can affect estate taxes when one party dies.
Documentary Stamp Tax & Capital Gains Tax: Potentially apply if properties are transferred between the spouses or cohabiting partners.
Always seek professional tax advice to ensure compliance with BIR rules and regulations.

4.4 Legal Counsel

Given the complexity of family and property law, especially in cross-border situations (e.g., one spouse is a foreigner), it is wise to consult a Philippine-licensed family law practitioner.
A qualified lawyer can help craft an agreement that meets all formal requirements and respects local laws and public policy.

5. Common Mistakes to Avoid

Failing to Execute the Agreement Before Marriage
- Prenuptial agreements must be signed before the marriage. Once married, you cannot validly sign a “prenup”; instead, you would need a postnuptial agreement, which has different legal implications and stricter scrutiny.
Insufficient Disclosure
- Not fully revealing all assets and liabilities can lead to claims of fraud.
Not Updating or Amending
- Major life changes (e.g., the birth of children, substantial inheritance, or a new business venture) may require a review of the agreement.
Relying on a Template
- Using generic templates without customizing for Philippine laws may produce clauses that are unenforceable or contradictory.
Not Seeking Legal and Tax Advice
- Overlooking tax implications, local regulations, and formalities can undermine the agreement’s purpose.

6. Conclusion

Prenuptial and cohabitation agreements serve as powerful tools for asset protection and financial clarity in the Philippines. For married couples, a properly drafted and executed prenuptial agreement can override the default property regime and ensure each spouse’s assets and interests are safeguarded. For cohabiting partners, a live-in agreement—while less recognized than a prenuptial agreement—can still mitigate disputes and clarify financial commitments.

The key to a valid and effective agreement is proper drafting, compliance with legal formalities, fair disclosure, and clear provisions that do not offend public policy or mandatory laws on family, property, and succession. To ensure the agreement reflects your unique circumstances and preserves enforceability, it is advisable to seek the services of a qualified Philippine attorney who specializes in family law.

Disclaimer: This article is intended for general information. Legal advice should be obtained from a duly licensed attorney based on your particular circumstances.