Most people think of marriage as the ultimate emotional and spiritual bond. They are looking forward to a life of happiness. However, when faced with negotiating a premarital agreement, they realize that not only do they have to decide what will happen to them if they divorce or when one of them dies, but that they also have to negotiate these issues with their fiancé. It’s not the type of subject that an about-to-be-married couple likes to think about prior to getting married.
Persons in Need of a Prenup
Consider a prenuptial agreement if you have at least one of the following situations:
- You are the person who will bring a lot of assets to the partnership, including a retirement account
- You have children from a prior marriage
- You own your own business or are a partner in a company
- You are on a fast career track and are likely to earn a hefty salary in the future
- You are an Indonesian planning to marry to a foreigner
- Anyone who is paying for his or her spouse to get an advanced degree which is likely to result in significant future earnings
- You plan to purchase land or a home in Indonesia during your marriage.
Legal Grounds for Prenuptial Agreements
The prenuptial agreement in Indonesia is honored and can be upheld in court. The laws governing prenuptial agreements (prenup) stipulate that the agreement should be made prior to marriage. The legal grounds for the prenup come from several applicable Indonesian laws, including: Civil Code, Marriage Law, and Compilation of Islamic Law, as follows:
- Article 199 of the Civil Code stipulates that: “From the commencing of a marriage, there shall exist by law, community property between the spouses to the extent that no other stipulations have been made in the prenuptial agreement…”
- The Marriage Law in Article 29(1) stipulates that: “At the time of or before the marriage took place, with the mutual consent of both parties, they may enter into an agreement approved by the Civil Registrar of marriage, after which it shall also apply to third parties as long as it involves them as well.” Another provision stipulated in the marriage law is that the agreement cannot be amended during marriage, except upon approval of both parties and cannot cause disadvantage to any third party. This stipulation comes from Article 29(4) in the Marriage Law.
- Article 47 (1) of Compilation of Islamic Law Article stipulates similar provision with the Marriage Law: “At the time of or before the marriage took place, the bride and groom may enter into an agreement approved by the Registrar of Marriage regarding the management of community property.”
Making a Prenup
Indonesian law does not provide a ready-made framework for a prenuptial agreement. You and your lawyer have leeway to define your future legal relationship, although you are bound by law, religion, morals, and public order considerations in drafting the agreement.
An Indonesian prenuptial agreement must be tailored to the particular needs of the husband and wife and be sufficiently flexible to take into account changes in your future circumstances during the course of the marriage. Both parties are free to determine the form of agreement, as long as it abides by religious and civil laws. The provisions are indeed very abstract. The legislature seems to leave it that way in order to make it flexible within the influences of religion, moral, and public order.
Begin by collecting all the subjects and items you want to be included in the prenuptial agreement. Ask your lawyer to draft the agreement and request his/her recommendations. Make note that the property purchased in Indonesia will be under your Indonesian spouse’s name. This is necessary because foreigners are not allowed to own property in Indonesia. For mixed couples what is needed is a prenup which instigates separation of property as the rule so that an Indonesian spouse can legally own and hold property under Hak Milik (Freehold Title) on property purchased. This negates the foreign spouse being an automatic owner of 50% of the property due to the usual joint property rule for married couples in Indonesia. This is one of the most important points of the pre-nuptial agreement and is a requirement for a mixed couple to purchase land/property in Indonesia.
You need to specify the percentage of the combined wealth that each spouse will receive if the marriage was dissolved. Included in the agreement should be full disclosure of all assets and liabilities, including the value of each asset. Ensure that the terms of the agreement do not promote dissolution of assets.
Keep a copy of all drafts of the documents so that there is a record that you have reviewed every draft. Keep all the drafts, correspondence, and notes so that the file reflects the negotiations and the various resulting revisions. Name and number the drafts in consecutive order such as “draft number three”. This record will be very helpful if the agreement is later contested. After negotiating the agreement, make sure you understand its terms and the importance of abiding by them. An agreement approved by both parties in its entirety is more likely to stand the test of time.
Avoid commingling assets and keep careful records. A qualified accountant or bookkeeper can assist you with this task. Even if the agreement is set aside or revoked, careful bookkeeping will make it easier for the court to trace assets and will save you lots of money.
At Wijaya & Co, we provide client with a pre-nuptial agreement questionnaire. The main purpose of this questionnaire is to gather facts and obtain client’s input on issues that should be incorporated into a prenuptial agreement. The questionnaire consists of the issues that should be considered when you enter into a prenuptial agreement. It can be difficult to discuss every issue that listed on the questionnaire. When you are ready with the answers, the couple may sit down together to discuss every one of the questions, even if they are difficult to resolve.
Legal Constraints for Mixed-Couples
If you are foreigner and plan to marry an Indonesian, you need to get a prenuptial agreement. Considering that foreigners are not allowed to legally own freehold title landed property in Indonesia, and if you wish to take the quite sensible precaution of a prenuptial agreement for the purpose of protecting yourself and your properties in the event that one of you dies, a prenuptial agreement is a must-have choice. The Indonesian government can, by law, take virtually every purchased property away from the grieving party if they did not create such a protective document PRIOR to marriage. (Note: Since May 2017 it has become possible to make an agreement for separation of assets during a marriage).
The legal constraints came from the Basic Property Law enacted in 1960 imposed that Indonesian married to the foreigner will be precluded to own a property in Indonesia. This is because the Marriage Law imposed joint property regime as imposed in Article 35: “Property acquired during the course of a marriage become community property.” As for the community property, the Marriage Law imposed further in Article 36 (1): “In regards to the Community Property, Husband or Wife may act on the consent of both parties.” Islamic Compilation Law, which is enacted specifically for Muslims, stipulates that: “A Husband or Wife is not allowed to sell or transfer the community property without the consent of the other.” This makes perfect sense because mutual consent must be obtained from the other spouse. When it comes to mixed couples, such consent cannot be obtained from your foreign spouse because they are not allowed to own property in Indonesia.
Recent developments entitle a foreigner to own a landed property under Hak Pakai (the Right of Use) valid for 30 (thirty years). This entitlement comes with a requirement that the foreigner must have a residence permit i.e. KITAS (Kartu Ijin Tinggal Terbatas/Limited Stay Permit). Hak Pakai may not be as strong as Hak Milik (Freehold Tittle), but the good thing about it is that you may inherit it to your children. As for the Indonesian spouse married to a foreigner, without a prenup, is precluded to own a freehold property. So yes, a prenuptial agreement is a mandatory for mixed-marriage couples in Indonesia in order to get around the property ownership restrictions. Logically, the prenup is useful to waive the consent from your foreign spouse in regards to the property transaction. How could consent can be retrieved when someone is not in the legal position to hold it? Therefore, in order to avoid this kind of trouble, it would be prudent to draft a prenuptial agreement complying with Indonesian law to ensure that your financial interests will be upheld by an Indonesian court.
Importance of Separation of Property
The idea of having a prenuptial agreement for mixed nationality couples, among others, is to have a property separation regime in your marriage since the Indonesia’s Marriage Law is assuming joint property ownership in all marriages. The Marriage Law is applicable to all Indonesians and to all marriages registered in Indonesia. Furthermore, the Basic Property Law in Indonesia does not allow foreigners the right to own freehold property in Indonesia. Therefore, when an Indonesian is married to a foreigner she/he will be precluded to legally own property in Indonesia.
The prenup creates a legal framework for a property separation in your marriage and thus preserves the rights of the Indonesian spouse to own property in Indonesia. The property ownership must be under the Indonesian spouse’s name as the title holder. In the event the foreign spouse passes away, the Indonesian spouse may keep the property for good. Given the origins of the prenuptial agreement in Indonesia are in marital property provisions, therefore it can be concluded that the main contents of a prenup are about the rules of community property notwithstanding the provisions of the Civil Code.
If the Indonesian spouse dies, the foreign spouse must transfer the property within 12 months to other Indonesian’s name. In many cases, this may be the child/children of the couple. At this stage, the stipulation imposed by the 1960 Basic Property Law is still applicable for foreigners. The prenup protects your financial interest in the event one of you passes away.
Record the Agreement
There are two registrations required for a prenuptial agreement. A premarital agreement must be recorded with the registrar’s office of the local district court and the marriage registry. The agreement will take effect for the husband and wife when the marriage is recorded at the Civil Registry or the Office of Religious Affairs and shall take effect against third parties upon the date of registration with the local district court where the marriage will take place.
The Marriage Law in Article 29(1) stipulates that: “At the time of or before the marriage took place, with the mutual consent of both parties, they may enter into an agreement approved by the Civil Registrar of Marriage, after which it shall also apply to third parties as long as it involves them as well.” Another provision stipulated in the marriage law is that the agreement cannot be amended during marriage, except upon approval of both parties and cannot cause disadvantage to any third party. This stipulation comes from Article 29(4) in the Marriage Law.
Registering a prenup with a district court is also required. If the agreement is not recorded at the local district court, then it will be considered that no prenuptial agreement exists. Thus, your marriage will have joint ownership in property. Article 152 of Civil Code states: “No stipulations in the prenuptial agreement which deviate entirely or partially from the provisions regarding legal community property shall apply to third parties, earlier than from the date of copying such stipulations in a public register, which shall be done with the court clerk at the court of justice, within whose legal jurisdiction the marriage was executed.”
Back-dated Prenuptial Agreements
A back-dated prenuptial agreement is not legal in Indonesia. Even though, you may find someone that is unethical enough to provide you with a back-dated prenup, one can always tell that it’s a back-dated prenup. A back-dated prenup is a marital agreement that is dated prior to your marriage, but signed after you’re already married. Couples do this because they realize they need it after they are already married. So, they back date the prenup as if it was signed prior to your marriage. But don’t forget what makes the prenup legally binding between you as husband and wife, and against other third parties. It requires that the document be registered, both at the clerk’s office of a district court, and at a marriage registry. These two offices won’t allow back dated registrations. They can only give you actual date registration.
So, instead of getting a back-dated prenup, it is preferable to do a postnup. Indonesia’s Marriage Law recognizes prenuptial agreements, (”prenup” for short) a contract created by two people before they are married. The Marriage Law only discusses the matrimonial agreement that must be drawn-up prior to marriage. Indeed, the law regarding the validity and enforcement of post-marital agreements is not well developed in Indonesia. But if we dig a little bit deeper, Indonesian Civil Code provides special provisions concerning property division in the course of marriage. This provision can be the ultimate solution for mixed-couples in Indonesia who did not sign a prenuptial agreement before their marriage. This may also preserve the rights of the Indonesian spouse to own property in Indonesia even though they are married to a foreigner.
Post Nuptial Agreements
Postnuptial agreements, also known as post-marital agreements, are agreements entered into after a marriage has taken place. There are many reasons why a mixed-marriage couple might wish to draw-up a postnuptial agreement. Among others, a couple that did not sign a prenuptial agreement before marriage may later determine that they want to have some sort of financial plan in place in the event of death or divorce.
Postnup is going to be the most legal document you will ever make. There’s a solid evidence that it is legally recognized by a government institution like the BPN (Badan Pertanahan Nasional). A mixed-married couple without a prenup, and the Indonesian spouse put her house under her sister’s name as a nominee. So they incorporated a postnup, and the BPN (the government institution that responsible to register titles of the property in Indonesia) put her name as the new property holder.
Indonesian Prenup Signed Abroad
In the event that you’re living abroad, or your marriage will be performed outside Indonesia and you cannot come to Indonesia just to sign a prenuptial agreement, you still can have a legally recognized prenuptial agreement by meeting the following legal formalities:
- The Choice of Law. Your prenup must be governed under the laws of the Republic of Indonesia. There are several requirements in order to comply with this: a) it must be written and signed in the Indonesian language (English version may be provided for mutual understanding), b) the prenup clearly states that Indonesian law is the law of choice, and therefore c) an Indonesian court must be used as the forum to resolve any dispute. Article 31 (1) of Law number 24 of 2009 regarding Flag, Language, State Symbol, and Anthem stipulates that: “Indonesian language must be used in the memorandum of understandings or agreements involving government institutions, government agencies, Indonesia’s private organizations or Indonesian citizens.” Any legal documents not complying with this rule may be null and void.
- Special Power of Attorney: If either of you cannot come to Indonesia to sign the prenup, you may authorize your partner with a special power of attorney to sign the prenup on your behalf. So, she/he will sign the prenup twice. One for her/himself and the other one is representing you.
- Indonesian Embassy Legalization. Since Indonesia is not a state-member of The Hague Convention on Abolishing the Requirement for Legalization for Foreign Public Documents, your special power of attorney must be legalized by the local Indonesian Embassy/Consulate. The embassy/consulate may requires you to attest your signature with a local notary in your country, get it legalized with the local State Department, etc. Each country imposed different requirements before the Indonesian Embassy/Consulate may legalize your signature on the special power of attorney.
Foreign Pre-Nuptial Agreements
It may also be advised to have a pre-nuptial agreement that is valid in the country of origin of the foreign spouse to govern assets in the foreign spouse’s country of origin. Since the Indonesian prenup only applicable to the property located in Indonesia, the foreign prenup may be applicable to the other property located outside Indonesia. This is what we called “back-to-back prenup.” Make sure both prenups do not contradict each other. It is event better if one prenup mentions the other prenup’s existence as the entire agreement.
Updating the Prenup
It is important to understand the need to keep the agreement up-to-date. The agreement should be designed to accommodate the passage of time and changes in status, such as the birth of children, and increases or decreases in wealth, or the disability of either party. Since no agreement can take into account all possible eventualities, however, you need to review the agreement periodically with an attorney to keep it current.
Death of Either Party
If your Indonesian spouse passes away, the foreign spouse will have to transfer the property title within one year. To transfer the property, you need to sell it to another Indonesian or pass it to your children. Under Citizenship Law, children born into mixed marriages are entitled to dual citizenship. They can keep the two citizenships until the age of 18 plus they have another 3 years to choose one of the two citizenships. In the event they did not choose Indonesian citizenship they will be treated as foreigner and therefore will not be able to hold the property any further. On the other hand, if the foreign spouse passes-away, the Indonesian spouse can maintain ownership of the property.
Property Management upon Death
Please be advised that the prenup is only applicable to your property when you’re alive. Distribution of assets when you pass-away is managed and distributed with a valid last will and testament.
Due to the Highly complicated nature of prenuptial agreements, we have removed the previously posted samples as they may seem to infer that one prenup fits all – which is not accurate. May we suggest that you consult with an attorney to be certain that all your necessary legal matters are covered.