Settling spouses' community property in Czech probate proceedings: contributions and investments

The death of one spouse ends the marriage as well as the community property of spouses (SJM), which must then be settled. Section 764(1) of the Czech Civil Code provides that where a marriage ends with the death of one spouse, probate proceedings concerning community property are conducted according to the rules of the matrimonial property regime that applied in the marriage. If the deceased spouse laid down certain instructions regarding his or her property in the event of death, these will also be respected. If no special conditions were laid down, the rules in Section 742 of the Civil Code apply, with the exception of Section 742(1)(c), i.e., with one exception, the standard rules for settling community property in the absence of the spouses' agreement. Notwithstanding the above, the heirs and the surviving spouse may agree on a different method of settlement.

These rules for settling community property on the death of a spouse are also reflected in the procedural rules of probate proceedings, namely Section 162 of Act No. 292/2013 Coll., on Special Court Proceedings (the "SCPA"), which sets out the procedure for settling community property in probate. Section 162(1) of the SCPA provides that the assets forming part of community property on the date of the deceased's death are first valued, and then any agreement between the heirs and the surviving spouse on the method of settlement is approved. It is clear from this that the procedural code, like the Civil Code, prefers a mutual agreement of the persons concerned on the settlement of community property. If the heirs and the surviving spouse do not agree, Section 162(2) of the SCPA applies, which provides that "if no agreement is reached under paragraph 1, the court shall determine by resolution, in accordance with the principles set out in the Civil Code, which assets from community property belong to the estate and which belong to the surviving spouse and, where appropriate, shall also determine the claim needed to settle the assets from community property."

It is evident that Section 162(2) of the SCPA refers to the principles of the Civil Code. These are the principles laid down in Section 764(1) of the Civil Code mentioned above. Through these cross-references, Section 742 applies in probate proceedings, with the exception of Section 742(1)(c). The same conclusion follows from the resolution of the Czech Supreme Court of 5 February 2020, file no. 24 Cdo 1763/2019:

Since the deceased died on 1 February 2017, the probate proceedings must be conducted under Act No. 292/2013 Coll., on Special Court Proceedings ("SCPA"). In inheritance, the law in force on the day of the deceased's death applies (Act No. 89/2012 Coll., the Civil Code, "CC"; cf. Section 3069 CC).

"If a marriage ends with the death of a spouse, the property rights and obligations of the former spouses shall be assessed in the probate proceedings according to the property regime that existed between the spouses and, where applicable, according to the instructions that the deceased spouse gave during his or her lifetime regarding his or her property in the event of death; otherwise, the rules set out in Section 742 apply, with the exception of Section 742(1)(c), unless the surviving spouse agrees otherwise with the heirs on the settlement (Section 764(1) CC).

If the deceased's marriage ended with his or her death, the court shall determine by resolution the usual price of the property belonging to the community property of the deceased and the surviving spouse on the date of the deceased's death and shall approve the agreement of the surviving spouse with the heirs on the settlement of the property belonging to the community property of the spouses, unless it is contrary to the instructions which the deceased gave during his or her lifetime regarding his or her property in the event of death, or to the law (Section 162(1) SCPA). If no agreement is reached under paragraph 1, the court shall determine by resolution, in accordance with the principles set out in the Civil Code, which assets from community property belong to the estate and which belong to the surviving spouse and, where appropriate, shall also determine the claim needed to settle the assets from community property (Section 162(2), first sentence, SCPA). As follows from the above, an agreement between the heirs and the surviving spouse is the preferred method of settlement both under Section 162 SCPA and under Section 764(1) CC."

It is clear from the above that the Civil Code expressly excludes the settlement in probate proceedings of contributions from one spouse's separate property to community property. Commentary literature on the exclusion of Section 742(1)(c) of the Civil Code states that the legislature offers no specific reasons for this rule, but it can be assumed that in the past it was intended to equalise the position of both spouses. Today this view has been overcome, and proposals to delete the provision appear in the literature. The commentary also points to the inconsistency of the rules: while the legislature excluded the settlement of contributions from separate to community property, it did not exclude the settlement of investments from community property into one spouse's separate property.1)

In probate proceedings, therefore, the surviving spouse will not be entitled to demand reimbursement of what he or she spent from separate property on community property, but retains the right to demand reimbursement of what was spent from community property on the other spouse's separate property. In addition to this right to reimbursement, however, in our view the surviving spouse will at the same time be obliged to reimburse what was spent from community property on his or her own separate property. The rules on reimbursement of investments therefore apply in both directions.

The specific procedure for settling an investment is described in the commentary on Section 742 of the Civil Code: "When quantifying the specific settlement share in the case of investments from community into separate property, it should always be taken into account that the common funds used also belong to the spouse for whose benefit they were spent. The value of the investment that one of the spouses is obliged to return (pay) should therefore first be added to the total value of the property being settled. This determines the total amount of property that would be settled had the funds not been spent for the benefit of one spouse's separate property. This increased amount then forms the basis for determining the amount of both spouses' settlement shares."2)

Property values, however, change over time, which the Civil Code takes into account in Section 742(2), stating that the value of what was spent from community property on a spouse's separate property is counted in the settlement of community property increased or decreased according to how the value of the asset on which the expenditure was made increased or decreased from the day of the expenditure to the day the community property was narrowed, dissolved or ceased to exist.

The value of the investment being settled is therefore indexed upwards or downwards under that provision in proportion to the ratio between the value of the asset in which the investment was made on the date community property ceased to exist and its value on the date the investment was made. The investment is then multiplied by the resulting ratio. Here is a model example: In 2018, CZK 100,000 from the community property of spouses A and B was invested in renovating a property owned by spouse B. In 2023 the community property ceased to exist and spouse A claims reimbursement of the investment in its indexed amount. The value of the property after the investment was CZK 5 million and on the date community property ceased to exist CZK 7.5 million. The rate of growth in the property's value is therefore 1.5. The investment of CZK 100,000 will thus be indexed by a factor of 1.5, and the investment indexed under Section 742(2) of the Civil Code corresponds to CZK 150,000. This amount will be added to the total value of community property under the rules above and taken into account in its settlement.

It is clear from the above that the rules for settling community property in probate proceedings do not differ much from the rules for the standard court settlement in the case of divorce, with one exception: contributions from one spouse's separate property to community property cannot be settled.

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1. PSUTKA, Jindřich. § 764 [Řízení o dědictví]. In: KRÁLÍČKOVÁ, Zdeňka, HRUŠÁKOVÁ, Milana, WESTPHALOVÁ, Lenka et al. Občanský zákoník II. Rodinné právo (§ 655−975). 2nd edition. Prague: C. H. Beck, 2020, p. 450, margin no. 2.
2. PSUTKA, Jindřich. § 742 [Pravidla soudního vypořádání SJM]. In: KRÁLÍČKOVÁ, Zdeňka, HRUŠÁKOVÁ, Milana, WESTPHALOVÁ, Lenka et al. Občanský zákoník II. Rodinné právo (§ 655−975). 2nd edition. Prague: C. H. Beck, 2020, p. 359, margin no. 3.

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