The “Resource Balancing Arrangement” – Property Arrangement which Applies to Couples Married from 1974 onwards
To whom does the “resource balance arrangement” apply to? The Prenuptial Relations Act, 1973 (hereinafter: “the Law”) allows married couples to draft a prenuptial agreement. If a couple does not draft a prenuptial agreement or the agreement does not say otherwise , there are two potential routes. For couples who were married before 1974, the “sharing partnership” will be applied. Alternatively, couples who were married from 1974 onwards, will have the “resource balance arrangement” applied, which we will discuss in this article.
It is of the upmost importance to draft a prenuptial agreement, in which the couple can settle their property issues. If they do not, they will be subject to the instructions of the law.
What is the Resource Balance arrangement?
The Resource Balance Arrangement (hereinafter: the “Arrangement”) is a property arrangement, whose instructions are specified in the law. The arrangement states that “upon divorce or the ending of the marriage due to the death of a spouse, each spouse is entitled to half the value of all the couple’s assets” (Section 5 (a) of the law). Regarding the death of one of the spouses, the law says: “In the ending of a marriage due to the death of a spouse, for the right to balance resources, his heirs take his place.” (Section 5 (b) of the law).
It is important to note that the arrangement grants a “contractual right” to half of the value of the assets of the couple only upon expiry of the marriage. The arrangement does not grant a “proprietary right” over the assets during the marriage.
Which assets will the Resource Balancing Arrangement apply to?
As mentioned, the arrangement applies to “all the spouses’’ assets”. This includes both tangible assets and intangible assets (rights). The law states “all of the couple’s assets – including future pension rights, retirement benefits, benefit funds and savings.” (Section 5 (c) of the law). The way to distribute pension savings is regulated by the Law on Distributing Pension Savings between Separated Spouses, 2014.
For the purpose of the arrangement, the value of all the couple’s assets is estimated, with each spouse entitled to half of the profits.
It should be emphasized that “evidence of the property being owned or held by one of the spouses or being registered in his or her name, is not solely the burden of proof that this property is exempt from the assets that are worth between the spouses.” (Section 9 of the Law).
Which assets will not be included in the Resource Balancing Arrangement?
Section 5 (a) of the law specifies various assets to which the arrangement will not apply:
- Assets that one spouse had on the eve of marriage
The marriage alone does not grant one spouse rights to the other spouse’s assets that they had prior to marriage (external assets).
Exception: One may “acquire” rights in the other’s external assets by virtue of the “mixing” principle. This refers to when the spouses assets were “mixed” and used in conjunction in the couple’s life. The burden of proving the mixing is on the spouse who claims it.
Example: One of the spouses, had his own apartment before marriage. After the marriage, the couple lived together in the apartment, invested money in it, raised children in it, etc. This apartment was probably “mixed” and became joint.
- Gift
A gift given to one of the spouses during the marriage, (Even if one spouse gives the other a gift), belongs to the recipient only, and this asset will not enter into the arrangement.
- Inheritance
Inheritance received by one of the spouses, by law or will.
Please note: Inheritance/Gifts can become joint. The “mixing” principle can be applied as it can within an “external asset”.
- Compensation / benefit
A benefit that one spouse receives from Social Security.
Compensation or benefits that one of the spouses is entitled to by law, due to body harm or death
- Property that the couple has agreed in writing that its value will not be included
This is not a prenuptial agreement, and as such, a document does not require the approval of any factor.
- Future pension rights, retirement benefits and savings
- Alimony rights (Article 17 of the Law)
Various protections against asset smuggling by one spouse
The law provides various protections over the couple’s assets in the arrangement. These protections are intended to prevent smuggling of assets by one of the spouses, by ensuring that these assets do not enter into the settlement.
The Family Court (hereinafter: the “Court”) and the Religious Court, who have authority over the couple’s marriage and divorce matters (hereinafter: the “Tribunal”), are given various powers to prevent property smuggling. These are as follows:
- The court or tribunal has the right to consider assets that a spouse has given / pledged to take out of his possession, or a property he has given / pledged to give as a gift with intent to thwart his spouse’s right to a settlement, as if it were still of that spouse. (section 7 of the Law).
- “If one of the spouses has acted in a way which leads to thwarting the right, or the future right of the other spouse under a prenuptial agreement or a resource balancing arrangement, or if there is a reasonable concern that he is about to take such action, the court or tribunal may, at the request of the other spouse, may take measures to preserve their right… “. (Section 11 of the Law).
Special powers of the Court/Tribunal regarding resource balancing arrangement
Section 8 of the law gives the court and tribunal the possibility of overriding the principle of an equal distribution of the value of the assets between the spouses. This section will be used often when there are “special circumstances that justify it”. The options before the court / tribunal are as follows:
- Determine the additional assets (beyond the exceptions) that will not enter into a settlement.
- “Determine that the balance of all or part of the value of the assets will not be split in half, but by a different ratio to be determined, taking into account future assets including the earning capacity of each spouse”:
For example: this arrangement applies to “future rights” (pension, education fund).
The arrangement does not apply to future assets (business reputation, academic degree, employment license) and does not apply to “earning capacity”. This is a reason that can be used when the pay gap between the couple is significant, because one of them took care of the house and the children, whilst the other invested into their career and succeeded in their job. As a result there is a large pay differential.
- “Determine that balancing the value of all or some of the assets will not be at the date of the balance of resources, but at an earlier date.”
- “Determine that the balance of resources will not refer to assets that the couple had at the time of resource balancing distribution, but also to assets that they had at an earlier date to determine.”
Severe violence between spouses may constitute “special circumstances”, that justifies the use of section 8 of the Law.
The overriding of the Resource Balancing Arrangement:
As stated at the beginning of the article, the right to a resource balance arrangement is granted to each spouse at the end of the marriage. An opening for “extortion” has been created here, where a spouse can use withhold the granting of the divorce in order to gain concessions on different issues.
Subsequently, section 5A was amended. The clause allows economic divorce (resource balancing arrangement) to precede the religious divorce. This is provided that a request was made, and one of the following is applicable;
- A year has passed since the opening of any legal process that indicates a desire to end the marriage;
- The couple lives separately (even under the same roof) for an accumulated nine months within a year;
- There is a rift between the couple for an accumulated consecutive period of nine-months in one year;
- Temporary warrants were issued because of spouse violence.
Note: The court or tribunal may shorten the times mentioned above.
Does a Resource Balancing Arrangement also apply in a religious tribunal?
The arrangement also applies in the religious tribunals. In the event that both spouses agree to the religious law, the Tribunal will adhere to the Religious Law (section 13 (b) of the Law).
Interested in drafting a Prenuptial Agreement? OUR LAW-FIRM ARE HERE AT YOUR SERVICE
A prenuptial agreement is an essential and necessary agreement but of special sensitivity. Hence it is important to have it done by a lawyer with the right qualifications. At our law- firm, you will find expert lawyers in the field of family law who are also qualified as mediators. Our lawyers will lead you to the perfect and comprehensive agreement you are interested in.
:
:מאמרים מומלצים