This article is for informational purposes only and is not a substitute for legal advice based on individual consultation.

This year marks the 35^th anniversary of the passing, by Israel’s Knesset, of the “Law of Property Relations Between Couples”. In recent years, this law has generated an extraordinary body of litigation and Supreme Court rulings. The purpose of this article is to introduce you to certain key concepts embodied in the law.

The law’s initial provision implicitly gives legal standing to a property agreement by simply stating that to be valid, it must be in writing. The agreement may take the form of a prenuptial agreement. However, according to various judicial precedents, a property agreement’s validity is not conditional upon marriage. A valid property agreement may be entered into either in contemplation of or even after the establishment of a domestic partnership. The term “domestic partnership” in this context refers to the situation where a couple chooses to live together without a formal marriage ceremony.

The property agreement’s validity is further made conditional upon its being certified by a specified third party. In many but not all instances this will require submission of the agreement to either the family court or the religious tribunal having jurisdiction over the couple. The certification process is anything but a mere formality.

The agreement is submitted to the court together with a written request for approval and payment of a fee. The court then sets a date for the couple to appear before it. The court is charged with the responsibility of ascertaining whether or not the agreement was freely entered into and its legal consequences fully understood. The court may and usually does actively examine the parties particularly if they are not represented by legal counsel. The court is empowered to condition its approval on the amendment, addition or deletion of certain provisions of the agreement. While the agreement can and should be drafted in the native language(s) of the parties thereto, a certified copy (or translation) in Hebrew must be submitted to the court.

At the risk of stating the obvious, a couple is not legally obligated to enter into a property agreement. However, one of the consequences of failing to do so is that the law will dictate how the property will be divided in the event of a breakup or death. In such a case, the guiding principal is that the couple’s property is to be divided equally between them.

Clause 4 of the law appears to exempt property held by one or the other of the partners prior to the marriage from the principal of equal division. The clause states that the fact of marriage per se will not operate to endow one of the partners with rights in the property of the other. However, the Supreme Court has posited the existence of an “implied understanding” that property owned prior to the marriage may merge with that property accumulated during the term of the marriage. Accordingly such “previously owned property” may be the subject of an equal division.

Similarly, clause 5(a)(1) of the law states that upon termination of a marriage, each of the partners is entitled to half of all the assets with the exception of assets held prior to the marriage or which were received during the marriage as either gifts or inheritance. This provision appears to be simple and clear cut. However, in a relatively recent line of cases, the Supreme Court has held that even such property ownership is subject to division upon the termination of the marriage.

The Court has cited principles of contract law in support of inclusion of the “excepted assets” positing that such principles are not negated by clause 5(a)(1). Critics of the Court have cited this as a glaring example of the alleged “Judicial Activism” that characterized the Court under former Chief Justice Aharon Barak. According to this school of thought, the Court has usurped the legislature by effectively amending the law by judicial fiat. Regardless, it is likely that this position will be upheld during the reign of Chief Justice Dorit Beinish whose appointment he supported.

A further judicial addition to the growing list of assets to be divided upon marital dissolution is that of “reputation” or “professional standing”. “Reputation” (monitin, in Hebrew) was previously considered an intangible asset, not to be taken into account as part of the overall property division between the couple. In support of its inclusion, the Supreme Court has cited various abstract or equitable principles such as the achievement of a “just result” or “fair outcome”.

As a result, if the start of a couple’s path in life coincided with the early stages of the professional career of either or both, then upon termination of the marriage, the professional standing achieved may be subject to financial evaluation by a court appointed expert, usually an accountant. Similarly, if a business was built up and developed over the course of a marriage by either of the spouses, then a value may be fixed for the business’ reputation again by a court appointed expert.

The general trend seems clear: whether by judicial fiat or otherwise, assets previously excluded from the balancing equation in the event of a marital breakup are being brought into play. Domestic partners, married or unmarried, seeking a different result are well advised to enter into a written agreement in which they rather than a Judge define the nature of their property relationship.

Frank Elliot Kahn, Attorney at Law and Advocate.

The writer is an active member of The Bar of The State of Israel and of The District of Columbia in The United States.