The settlement consists in the distribution of marital assets, thus passing the property ownership to former spouses individually, creating what is commonly referred as an “award of goods”.
It is important to consider that marriages or economic regimes can be liquidated. In principle, those marriages which are governed by “division of properties” does not need to liquidate its assets, understanding that during the marriage each is awarded to one or the other, however, in exceptional cases of mistaken rights and/or goods, this scheme can also go through a liquidation. However, in general, it is determined that economic regimes must be liquidated, for legal distribution of goods. It is important to emphasise, settlement does not have to be held in conjunction with divorce or separation, it can be done at any time, without any time limitations, there is no legal deadline. It is always advisable to settle at the time of divorce for the economy of not having to initiate a subsequent judicial proceeding. In addition, liquidation can create more complexity and confusion by having to devote more time to gather the information and data that can go missing through the years.
Regardless, it is common the practice to leave the liquidation of assets to a subsequent divorce, so the couple can quickly solve their personal status – easing coexistence, so in regards to their children and to try to reach consensus on the distribution of assets can usually take a lot more time and effort. It is therefore not required by law to liquidate in sensu strict “at a particular time” or “within a certain period,” leaving it entirely to the discretion of the spouses.
Fiscally speaking, there is no impact or prejudice -to spouse the distribution or allocation of assets through liquidation, as it is exempt from taxes such as:
- Capital Transfer and stamp duty
- Gain or increase in value of urban land
- Personal income tax – does not count as an increase or decrease of assets
Obviously, it is more advantageous to the former spouses to reach a mutual agreement on the distribution and allocation of assets to liquidate, but more often there is a dispute concerning the beneficial ownership, especially when there is shared possessions and marital property is involved in purchasing and combined sales, creating confusion and a different interpretation of goods between both parties involved.