The Importance of a Marital Property Agreement

The Importance of a Marital Property Agreement

In today’s reality, “living happily ever after” belongs only in fairy tales, and even there, not everything is rosy. When a couple enters marriage with a substantial gap between the assets each has accumulated, concerns arise about what will happen if their relationship runs aground. In such cases, they can take preventive action by signing a marital property agreement, also known as a prenuptial agreement, to make dividing their property easier if they separate and to avoid unnecessary conflicts.

When two people decide to marry, they unite their hearts and souls and, alongside this, begin sharing assets. Discussing money is not romantic, but couples do more in life than walk hand in hand into the sunset. The months between the proposal and the wedding, as well as the honeymoon, are euphoric days. In that atmosphere, discussing the practical details of married life is not always comfortable, especially “what if” questions or, heaven forbid, divorce. Yet reality speaks for itself, and the statistics do not lie.

Looking at the figures from the Rabbinical Courts and from the Central Bureau of Statistics (CBS) reveals a steady rise in the number of couples divorcing in Israel. Many couples will not survive their first years of marriage, and most divorces occur after about a decade together. Presumably, none of them imagined themselves on the steps of the rabbinate holding a divorce document.

In this reality, planning for “the day after” is enormously important. This applies to every couple, and even more so to a second partnership. A marital property agreement made before marriage is a legally binding agreement signed by two people before marrying, or entering another form of shared life. It can cover a broad range of matters, with mechanisms for determining ownership of the couple’s property rights and assets at its core. Its purpose is to settle, by full mutual agreement, matters that could become contentious if their relationship deteriorates. Sometimes such an agreement is made after a couple experiences a crisis and decides to try to repair their relationship, while preparing in advance for the possibility that it will end.

Who needs a property agreement, and what is its purpose?

Gossip about the world’s wealthiest people or celebrities reinforces the belief that a property agreement matters only to the rich or those with many assets. This is untrue: you do not have to be Bill and Melinda Gates to sign a prenuptial agreement. Such agreements suit everyone, for various reasons, above all because careful forethought is better than an afterthought.

At E. Shiloh & Co. law firm they explain that they see a wide variety of couples of different statuses, ages and life stories. In some couples, one partner enters the relationship with an apartment received as a gift, inherited or purchased. For others, this is their second or third partnership, and each enters the marriage with property and children from a previous relationship to provide for.... That partner wishes to retain sole ownership of the asset and protect it if, unfortunately, the new relationship does not last. It is important to understand that the Spouses (Property Relations) Law, 5733–1973 defines how property is divided between spouses during divorce. The statutory default is that all property and assets accumulated during the marriage are divided equally, including assets, money, savings, real estate, movable property, shares, provident funds, pension rights, business assets, business and personal goodwill, and so forth. However, the law provides that if the spouses reach different agreements, those agreements prevail over its provisions. Therefore, to ensure that an asset, capital or funds acquired before their shared life remain the sole property of the partner who brought them into it, and to prevent a claim that they became part of the joint property, signing a property agreement is essential. It specifies each party’s personal property, their joint property, and a mechanism for dividing the joint property in future.

How a prenuptial agreement is structured and what it includes

As noted, this legal agreement is suitable for couples before marriage, married couples who wish to regulate the future division of joint property following a relationship crisis, and unmarried cohabiting partners. It governs the parties’ relationship in property and financial matters. Once the parties agree on its terms, they sign the agreement and submit it to the Family Court for approval, giving it the force of a binding judgment. Alternatively, if signed before marriage, it may also be signed before a notary.

In principle, a property agreement is a concise document focused solely on property matters. It lists the types of existing and future assets and how they will be held—as personal or joint property—and establishes a mechanism for dividing joint property if the couple ends their relationship.

A marital property agreement addresses each party’s personal property, whether accumulated before or after formalizing the relationship; gifts and inheritances received during their shared life; holdings in companies, which may yield dividends; patents, which may yield royalties; social-benefit entitlements accrued before and after marriage; personal goodwill that one partner acquires and the other’s contribution to it; and any other asset either spouse receives after the wedding. It determines whether these assets will be divided according to the statutory presumption of sharing or in another way. The agreement can already establish the mechanism for dividing joint property on separation and how the entire process will be managed when the time comes.

Thinking about a future separation while planning a wedding is highly sensitive and sometimes stirs strong emotions. It is difficult to think about divorce when love is overflowing. It is no less difficult to discuss the future division of property, behind which lie questions of trust. Some will feel that raising these questions starts a marriage off on the wrong foot. It is therefore important to choose an experienced professional, a lawyer specializing in family property law, who can manage the process professionally, wisely and sensitively, while addressing each partner’s needs—and sometimes those of worried parents.

Despite all the concerns, difficulties and doubts, it is preferable to discuss property questions openly and fairly, especially when one partner has independently accumulated money or property and wants to protect it and ensure that it remains theirs if the relationship runs aground. The agreement is particularly important in a second partnership, where each person brings assets, money and children from a previous marriage, and everything must be optimally organized so that everyone can feel calm and secure. Difficult though these questions are, taking them seriously and preparing a fair marital property agreement can help the couple come closer to fulfilling the saying, “and they lived happily ever after.”

One final but important note  —a marital property agreement signed before marriage may be approved by the court or signed before a notary. A lawyer who is also a notary can save the couple the trouble of arranging a court hearing to approve the agreement. If the agreement is signed after marriage, it can be approved only by the Family Court.