Married and Common-Law Couples – Division of Property

The Israeli Supreme Court recently handed down an important ruling addressing the issue of division of property between common-law spouses. Specifically, the ruling changes the “presumption of property sharing” arrangement prescribed in case law, which was accepted until now. This ruling applies only to common-law couples, and not to married couples, whose property division matters are regulated under other legislation.

Division of Property – Married Couples vs. Common-Law Couples

Couples formalizing their relationship in a way that has significance for state institutions have two options: marriage or common-law status. Each option has different implications, including regarding property division in the event the couple splits up.

Different laws apply to married couples and common-law couples. It is important to know what they are in order to ensure property is divided fairly in the event the relationship ends.

Married Couples

Couples married after 1973 are subject to the Property Relations between Spouses Law. This law prescribes that, during the marriage, each spouse retains separate ownership of his or her assets. Only if the couple decides to divorce will the court implement the provision of the law. This provision requires a balancing of the marital resources to determine how to divide them.

For the most part, assets are divided equally between the spouses. However, section 8(2) of the law allows the court to divide the property unequally under special circumstances that justify doing so.

Common-Law Couples

For common-law couples, case law prescribes that a presumption of property sharing will apply. This arrangement prescribes that assets the couple accumulates during its relationship (and sometimes also prior to the relationship) are jointly and equally owned by the spouses. In other words, from the moment the couple registers as a common-law couple, the accumulated assets become jointly owned. Therefore, as long as the court determines there was an intention to share, the property is divided equally.

The New Supreme Court Ruling

This latest Supreme Court ruling significantly changes the property division arrangement for common-law couples. The ruling comes in a case involving a man and a woman who were a common-law couple for several years, during which they had two children. During most of the relationship, the couple lived with its children in an apartment registered solely under the woman’s name. After the couple separated, the woman filed a lawsuit claiming the apartment in which the family lived was not included under the presumption of sharing. She argued the couple maintained property separation and had not intended to share said apartment.

The district court ruled to apply the presumption of sharing to the parties’ rights in the apartment. Nevertheless, the court stated that, notwithstanding the presumption of sharing, the division between the spouses does not have to be equal. The court, under particular circumstances, could divide the property unequally between the spouses, even if the presumption of sharing exists.

On appeal, the Supreme Court reversed the district court decision and ruled that, when the presumption of sharing applies, property cannot be divided unequally between the spouses and must solely be divided equally. In order to divide property unequally when the presumption of sharing applies, the legislature must enact a specific provision of law (which currently does not exist for common-law couples). The Property Relations between Spouses Law applies solely to married couples. Consequently, section 8(2) of that law cannot be applied to property divisions between common-law spouses.

Property Relations Law versus Case Law

The Supreme Court clarified that the Property Relations between Spouses Law applies solely to married couples and allows for an unequal division of property. However, for common-law couples, the property will be divided solely according to the presumption of sharing, which prescribes that property must be divided equally between common-law spouses.

The property division arrangements that exist in the law for married couples and in case law for common-law couples often fail to provide a just and correct division of property that protects the interests of each spouse.

Financial Agreements

When married couples sign a prenuptial agreement and common-law couples sign a cohabitation agreement, they are jointly agreeing in advance on the conditions determining how to divide their resources if they split up. Such agreements are designed to protect both spouses’ financial interests upon separation and, primarily, to minimize financial disputes.

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Barnea Jaffa Lande’s Private Clients Department has extensive experience in assisting in the drafting of financial agreements and other prenuptial agreements. Adv. Liat Keisary Yahalomi, a partner and the head of the practice, is happy to be of service.