Financial agreement in Israel
Making a prenuptial agreement is becoming an accepted procedure among couples who are at the beginning of their marriage. People are often reluctant to make a financial agreement, as the legal debate over the material and money is inconsistent with the romance and love that a young couple feels at the beginning of their journey. However, a change in perception can indeed be seen among couples before their marriage, and this can be attributed to the following reasons:
* Increase in the percentage of divorcees in Israel – Statistically, one in three marriages will end in divorce.
* Increasing the age of marriage – Unlike in the past when people would get married in their 20s, today there is an increasing trend and the age of those getting married is rising, as well as the assets that they have managed to accumulate during their lives as singles.
It is important to remember that a prenuptial agreement overrides the division of property under the prenuptial law and therefore it is especially worthwhile to draft it when there is a large economic gap between the spouses, in order to protect both parties to the agreement. In this article we will look at two weighty issues for the divorcing couple.
What are social rights?
Social rights can be very diverse, they include social funds, executive insurance, provident funds, pensions, and more.
Social rights are in fact fruits that the couple jointly earned throughout the marriage period. This is true whether the two spouses worked together or whether only one of the spouses entered the labor market, with the other spouse engaged in the household and raising the children. Even in this state of affairs, both spouses have contributed in a joint effort to their economic well-being.
The calculation of the equitable social rights is calculated by an actuary who gives his opinion as to how they are actually divided. The question arises at what stage will the spouse receive the social rights and what to do when the rights are not liquid?
When the rights are not liquid, it is usually necessary to wait until their due date. On the day the rights are liquid, one spouse will pay the other spouse his rights.
In order to ensure that when the funds are released, the amount due to the other spouse will be transferred to it – a foreclosure can be imposed on the relevant bodies holding the money or a note can be registered under the Law for the Distribution of Pension Savings between Divorced Spouses, 2014.
There is another option in which a fixed amount will be transferred each month, for example in the case where a pension is paid monthly to the spouse, the benefiter would transfer to the other spouse his share every month.
In the event that parties choose to sever the economic relationship completely after the divorce, then the social rights can be divided even when they are not liquid, by paying the value of the rights at the time of the divorce, by capitalizing the rights. This way the couple can end the economic relationship immediately, without being dependent on each other later on.
What are career assets?
Career assets are a definition of a person’s earning capacity from intangible assets, such as: academic degree, reputation, professional license, profession and the like. In the past, the prevailing approach was that career assets are not balancing assets and that there is difficulty with any of them. However, over the years another approach has begun to develop which recognizes career assets as a balancing asset.
Reputation is considered a property recognized as an asset. It, too, as well as the other tangible and intangible assets, can be valued and divided. The Supreme Court ruled in case number 72/550 Baumel v. Haifa that reputation is an intangible asset and that it is a proprietary right.
Although it seems that the Financial Relations Act, which is relevant to this issue, makes a clear division between “her” assets and “his” assets, this is not the case, because in some cases also assets that one spouse has accumulated as an individual and are reflected in the business (such as degree, Profession, reputation) become a common property even though the business was established by one of the parties before the marriage.
It should be remembered of course that there is no similar case after and as is well known, section 8 (2) of the Financial Relations Act gives the court discretion as to the division of property between the parties. The section empowers the court to divide the assets not by way of half-on-half, but by other relative parts. With the help of a prenuptial agreement, the spouses can clearly decide how all the assets will be divided in the event of a divorce, and not leave this to the discretion of the court. There are other circumstances that may affect the court’s discretion in the distribution of resources between the spouses, such as:
* Violence
* Property smuggling
* Refusal to grant a divorce
* The identity of the guardian parent after the divorce
In some cases, the court has no clear criteria, and it decides according to each case and its circumstances. Regarding the division of the intangible assets of the business, which is the most difficult, the court set a number of criteria when deciding whether and how the career assets will be divided.
As stated, the court calculates the reputation worth according to the circumstances of each case, so that in the absence of a financial agreement it is difficult to know in advance exactly how the distribution will be made and according to what criteria.
Division of the investment portfolio in the event of a divorce
Once the actuary has given his opinion regarding each of the assets, the picture regarding the feasibility of repaying the assets at the time of the divorce will become clear. Including the matter of the investment portfolio and the manner of its distribution. It is possible that the recommendation will be dividing over a specific timeline that is most suitable for each component of the investment portfolio. There are cases where the value of the property will increase (for example: in the case of a real estate property that is in the middle of the city 38 plan), then both spouses should wait for the yield of the property and only then share it. The same applies to a certain component in the investment portfolio which may have a sharp yield after the date of the divorce.
Of course in this case there is a disadvantage and is the continuation of the relationship (at least the financial one) between the spouses after the divorce, which is not suitable for any divorcing couple and there are those who would prefer to lose a considerable amount of money as long as the relationship with the spouse is completely severed.
When the assets are liquid and there is no economically profitable prevention for some of them, it is possible to distribute them or alternatively buy them at the monetary value of one spouse from the other.
