If the Business Was Established Before the Marriage

If one spouse already owned an interest in the business when the marital community of property began, that interest will generally qualify as the spouse’s separate property. However, this does not mean that all income and financial matters relating to the business fall outside the scope of the division of marital assets.

Under Hungarian law, the net benefits derived from separate property during the marital community of life generally qualify as joint marital property after the relevant management and maintenance costs and other burdens have been deducted. However, an increase in the value of a business does not automatically turn the originally separate business interest into joint marital property. The division of assets may therefore require an assessment of the factors that contributed to the increase in value and whether investments made from joint marital assets give rise to a reimbursement claim.

If the Business Was Established During the Marriage

If a business interest was acquired during the marital community of property using joint marital assets, it will generally form part of the spouses’ joint property. This may be the case even if only one spouse is registered as the owner of the business interest.

The legal assessment depends on the circumstances in which the interest was acquired and the source of the funds used. For example, if the interest was acquired using one spouse’s separate property, the legal outcome may be different. Hungarian law presumes that assets acquired during the marital community of property belong to the spouses’ joint property, although this presumption may be rebutted by evidence.

Importantly, the fact that a business interest forms part of the spouses’ joint property does not automatically mean that both spouses become members of the company or gain the right to manage it. During the division of assets, the business interest may remain with one spouse while the other receives financial compensation or other assets. In the case of a Hungarian limited liability company (korlátolt felelősségű társaság, or Kft.), the court may, subject to the statutory requirements, award a business share or a portion of it to the spouse who is not a member of the company.

What If Only One Spouse Worked in the Business?

A common situation arises when only one spouse actively managed the business, while the other took care of the household or raised the children. The fact that one spouse did not personally work in the company does not, in itself, exclude that spouse from asserting a claim under marital property law. If the business interest qualifies as joint marital property, entitlement does not depend solely on whether both spouses contributed their labour to the company. Nevertheless, the active spouse’s work, business relationships and management decisions may be relevant when determining the value of the business interest.

How Is the Value of the Business Determined?

The registered share capital or the book value of a company’s equity does not necessarily reflect the actual value of its business interests. The company’s financial position, profitability, liabilities and market position may also need to be considered. If the spouses disagree on valuation, an expert assessment may be appropriate.

Proper documentation is therefore essential. Relevant records may include documents relating to the acquisition of the business interest, evidence of the source of the funds used to establish or develop the business, financial statements and any marital property agreement. The actual period during which the spouses’ marital community of life existed may also be important; the date of the wedding or the final divorce judgment is not necessarily decisive on its own.

Conclusion

The treatment of a family business in divorce depends on the circumstances of each case. The key considerations are not limited to who established the company, who is registered as its owner or who worked in the business. The timing and source of the acquisition, the existence of the marital community of property and investments made during the marriage are also important.

Ownership of a business interest and the division of assets between spouses are two distinct legal issues. Early assessment of the relevant circumstances and appropriate legal advice can help protect both spouses’ financial interests while minimising unnecessary disruption to the business.

Divorce can raise significant questions not only in personal life but also regarding the future of a business. This is particularly true when one spouse owns a company or when the spouses have built a business together during their marriage. In such cases, an important question arises: if the company is registered in only one spouse’s name, can the other spouse claim a share of its value?

The answer depends on several factors, including when and how the business interest was acquired, the period during which the spouses’ marital community of property existed, and whether joint marital assets were used to finance the business.

When transferring a high-value property, the key question is not only under which legal title the property can be acquired, but also what tax or duty consequences arise from the chosen legal arrangement. This is particularly relevant where the acquirer does not fall within the scope of persons exempt from inheritance or gift duty. This raises an important question: which legal arrangement – inheritance, gift, maintenance agreement, inheritance contract or trust – may result in the lowest duty burden?

Notice: This article does not constitute legal advisory services, and does not necessarily match the interpretation of the applicable laws by the authorities. This article is for general information only.

In today’s modern legal environment, the documented and professional examination of digital evidence, as well as the protection of devices and user accounts, has become increasingly important in legal disputes and proceedings.

Our firm’s cooperating partner in this field is Biztonság Akadémia Kft.

The professional expertise of our partner is provided by Tamás Durmics, an independent IT security expert and ethical hacker with more than 25 years of experience in information technology and security. His work focuses on documented and independent examination methodologies, as well as on presenting technical findings in a clear and comprehensible manner suitable for use in legal proceedings.

One of the most common situations giving rise to the greatest number of conflicts during probate proceedings is when the deceased dies without making a testamentary disposition. In such cases, the fate of the assets and debts is determined by the statutory order of succession under the Hungarian Civil Code. Although the rules are clear, a significant proportion of clients are not aware of the more important changes introduced by the Civil Code currently in force, particularly with regard to the rights of the surviving spouse or the extent of the compulsory share.

Under the rules currently in force, the general rate of personal income tax (PIT) is 15 per cent of the tax base. In everyday language, many people lump the different concepts together and simply call every case in which no tax is deducted from their gross salary a “tax exemption.” From a legal-dogmatic perspective, however, classical tax exemption must be sharply distinguished from tax allowances. While tax-exempt revenues do not form part of the tax base in the first place, the tax system also recognises different rules that result in a reduction of the private individual’s tax: these are tax allowances reducing the consolidated tax base.

A particular characteristic of personal income tax is that these tax allowances and tax exemptions may be claimed only against income falling within the consolidated tax base and the tax thereon, and exclusively up to that amount.