Uri Ganor, Advocate and Attorney – Prenuptial/Financial Agreements Expert

Financial agreement between spouses- background

Every couple can enter a financial agreement, at any stage in their relationship: before getting married, during the marriage or even when living together as common-law spouses.

Different names of a financial agreement 

A financial agreement between spouses is also known as a joint lives' agreement, premarital or prenuptial agreement.

About the financial agreement – a legal document

A financial agreement between spouses is a legal document signed by both of you, the couple, with the purpose of foreseeing the future and arranging all your property affairs: both assets accumulated thus far as well as any future assets (both joint and separate), including any changes that the property will undergo, such as increase in value, during the many years of your relationship ahead of you and most importantly: it also discusses the issue of debts.

The word "financial" is somewhat misleading because the combination of "financial agreement" doesn’t only refer to money, but rather all types of assets and rights. In other words: anything of monetary value.

Matters arranged in a financial agreement between spouses

First, an important clarification: a financial agreement doesn’t have to include all the items on the list. A couple can decide to only include the minimal, necessary terms in a financial agreement and if one of them tells an attorney that they want to sign a basic financial agreement, that is precisely what they'll get.

Remember: the couple has to choose which financial agreement is suitable for them and what to include in it. Guide your attorney on which issues are important to you both, ask him or her to include them in the agreement so that your wishes will be respected and applied.

Basic (short) financial agreement between spouses

✔️ Previous personal property: each partner's personal property before the relationship began, such as ownership of real estate, shares, business, funds in bank accounts and cars. Maintaining independent control of personal property at the complete, exclusive discretion of the property's owner.

✔️ Personal past debts and future debts: the debts accumulated or to be accumulated by each spouse, including debts to governmental bodies, such as Income Tax Authority and the National Insurance Institution. This subject can be critical. You must hermetically prevent the possibility that each partner's debts will apply to the other partner and therefore, this must be clearly stipulated in an organized financial agreement.

✔️ Property purchased together during the relationship, in unequal investments: all the arrangements concerning each party's share in joint property must be determined, particularly procedures for selling the property and dividing the consideration (there have been cases when one spouse insists on not selling a joint apartment because he or she prefers to wait until a higher offer is received, while the second spouse wants to quickly sell the apartment, without delay).     

✔️ Gifts and inheritances: such that each spouse receives during the relationship. This section also refers to situations when you receive a gift from a relative, without defining the identity of the receiver, as well as non-monetary gifts intended for use by both spouse and their joint children.

Detailed (comprehensive) financial agreement between spouses

In addition to the issues covered by a basic financial agreement, the following issues can also be arranged:

• Social benefits: social benefits accumulated or that will be accumulated from your work, such as pension funds, advanced study funds, severance pay and directors insurance. In case a couple has children and one spouse stops working for a period of more than three months, the agreement should stipulate that the other party must participate in that party's losses.
• Wedding gifts: this section refers to couples expected to receive unequal amounts from their families.
• Determining jurisdiction in case of a legal dispute: jurisdiction in case of a dispute should be awarded to the Family Court, the Rabbinical Court or an agreed arbitrator. In case of permanent residence abroad, the couple must decide whether the courts in the foreign country will have jurisdiction. This section is extremely important, especially when one of the spouses is a foreign citizen and if this matter is not clearly arranged, one party might find themselves being dragged to a foreign court that doesn’t recognize the financial agreement as a binding document.
• Ketubah: what effect does it have? Must the husband pay the wife her Ketubah if the time comes or should the couple consider it a ceremonial and non-binding matter?
• Passing away: what happens with the arrangements in the financial agreement if Heaven Forbid! one spouse passes away?
• Get refusal: a section referring to this matter, which is also known as a "mutual respect agreement" is intended to avoid a situation where one spouse takes advantage of the Get issue [divorce according to Jewish religious laws] as leverage, meaning refusing a Get and preventing the party needing the Get (in order to change status from married to divorce) from receiving it. Although this section poses problems, they can be solved.
• Winning lotteries: will funds from winning lotteries be personal (meaning, will they belong to the person who purchased the winning card) or joint?
• Pets: even the question of who owns pets can be arranged. You can read about this on the internet.
• Liquidated damages: this section refers to when one spouse breaches the financial agreement.
• Liquidated damages to prevent filing futile claims: this might surprise you, but these sorts of claims are often filed. In Israel everything can be judged and everyone can file a claim against someone else. What's the use of preparing a financial agreement and defining each party's rights, if eventually you separate and find yourself in court? This section is imperative since a legal proceeding will cause both you and your families distress and damages. The possibility of a court deliberation must be removed from your agenda by defining clear arrangements in this matter, which will cause you to think twice and more before appealing to the court and filing harassing claims.
• Mediation: the agreement must stipulate that before enforcing the agreement, the parties must first try mediation.
• Intellectual property, including personal reputation: if one of you has skills in a certain area, including a professional skill (medicine, engineering, law, computers etc.), you might possibly build a reputation during the relationship. Undeniably, one's reputation is personal, yet what about the other party who sacrificed his or her career, for example in order to raise children, so that the other spouse could dedicate his or her time in building that reputation?
• Establishing a business: you can read more about this below. There are two aspects in this matter: profits and losses. You have to decide: if you want to be partners in the business, will you also share debts?
• Joint bank account: there is no obligation to arrange this issue, yet it is important to determine that if you decide to open a joint bank account, will you deposit your entire work incomes into that joint account, do you consider that account to belong to both of you or will you only deposit varying amounts as agreed from time to time into that account as necessary for your needs?
• Accumulating personal property in the future: this refers to personal property accumulated by each party. Will it remain personal property, not to be divided in case of separation?   
• Exchanging personal or joint property: each party's personal property is dynamic; therefore, you need to decide how the agreement will apply in order to avoid having to prepare a financial agreement over and over again.
• Proceeds, increase in value, building rights etc.: all these matters should be addressed, both in regard to personal property, as well as joint property.

There are three main reasons for entering a financial agreement between spouses:

The first: you are establishing a partnership, which is economic in all aspects and every economic partnership must be defined in an agreement.

The second: your investments in the partnership are not equal, nor will they be equal in the future.

The third: this partnership is emotionally charged, considering that it refers to your family and love.

To be more specific, your partnership is established for non-business purposes (starting a family), it is driven by your love and deep friendship. Nonetheless, like in every business, you want to profit and gather property. In a regular business partnership, each partner's investment and labor in that business determines shares in the partnership, the profits, in case of liquidating the partnership, its debts and losses. Equal investment – equal shares. Unequal investments – unequal shares. But what about the economic partnership between spouses? How do you consider your shares? To what extent will it be affected by your connection as a couple and as a family?

Example and explanation

Let's assume that one of you earns more than the other. One has property from the past and the other has less or no property at all. One of you owns a business or will own a business in the future. One of you will build a professional career and the other will raise the children. Additionally, over the years you will receive gifts and inheritances of unequal value.

If you consider all this and more, how will you decide each party's share if you separate? how much will each party get upon separation?

This partnership has two components: the first includes complete reciprocation, partnership, harmony, love, sex, raising children and fidelity. The second includes your property relations that often pose large differences between you.

In case of separation, the owner of the property or a party with potential to purchase property in the future, will want to preserve what is his or hers and the other party who does not own property or has potential to purchase property, will not want to separate and end up empty handed.

In lack of a financial agreement between spouses, these conflicting interests collide.

Soon you will find yourselves relying on a broken reed, the Honorable Court and I guarantee, as an expert attorney specializing in financial agreements, that is the last position you want to find yourself in. Not at all. A good, hermetic financial agreement, arranges and stipulates not only your rights and obligations regarding property upon separation, but also prevents each of you from filing futile claims against a spouse who you used to love. A financial agreement blocks the option of appealing to the court.

If you know this is the case, that you have a good and fair arrangement that balances between your separate property on the one hand and your relationship and partnership on the other, this will contribute to your peace of mind and will remove unnecessary tension from your relationship, and I assure you, this is not just a figure of speech. As an experienced attorney who has met many couples, I know what I'm talking about.

A financial agreement – also of interest (and mainly) of the party with less property

I would like to clarify a common mistake: a financial agreement is not necessarily intended to serve the party with more property. A financial agreement serves the mutual interests of both parties. I will gladly clarify this matter by telephone with the spouse who has no or has less property and explain why he or she should prepare a financial agreement.

The role of a financial agreement in day-to-day life

Don’t worry: a financial agreement has no role in daily life. You can store it in the drawer and even lock it (just don’t lose the key). If you decide to separate – you can retrieve it. In such case all your property matters, including dividing property, will already be prearranged and ready. Everything will be concluded in writing, signed and sealed. A financial agreement will save you tiring battles that will only hurt you, your children and families, who all will be drawn into a bitter dispute (you have to agree that an ugly separation can happen to you too …)

When is entering a financial agreement between spouses recommended?

The financial agreement should be entered now, at the beginning of your relationship when it is based on friendship and love. A financial agreement will benefit from your friendship and communication and will prepare you for a situation that these are pushed aside in case of separating.

See the article: financial agreement before or after the wedding.

Apprehension from entering a financial agreement between spouses

I often come across people afraid of entering a financial agreement in the early and fragile stages of their relationship, when matters are emotional and sensitive. It's possible that even you, while reading these lines, feel somewhat uncomfortable and apprehensive. Right? Am I right? Let's put it all out there: this fear, this unpleasantness, are not only understandable, they're justified! It is indeed an awkward moment when one spouse approaches the other before getting married and asks to sign a financial agreement. The request can come as a total surprise to the other spouse since the concept is often perceived as an expression of lack of trust. This request can definitely cause tension in a relationship and sometimes even end it.

I promised to say the truth and I'm staying true to my word. But don’t get freaked out. There are solutions, read the article: Financial Agreement: do you feel pressured and what can help?      

The secret of success to a good financial agreement

The importance of "how"

A financial agreement is a sensitive and volatile matter. In most cases the initiative for preparing a financial agreement comes from the spouse who owns more property or from the spouse with a potential to accumulate more property in the future (from his or her profession or family). The purpose of initiating an agreement is to protect that property in case of separation.

Turning to our spouse and asking to sign a financial agreement, means we want to protect ourselves from the possibility that he or she will want shares in our property upon a separation. The immediate result is your partner might feel that he or she is not trusted, that you "suspect" them. This might be considered a trust crisis and obviously without trust there's no point in starting a family or an economic partnership, is there?

Asking to prepare a financial agreement can lead to such a deep crisis that you might regret ever having brought up the subject. The agreement can be the last straw, meaning it might end the relationship or even worse – it might scar a relationship and always remain in the background.

The way to successfully conclude a financial agreement depends on the "how": how you prepare the agreement, how you bring up the subject and how sensitive and considerate you are. Think before you act.

If you haven’t brought up the idea yet, here are my recommendations for the proper stages:

First stage – a conversation about financial agreements among friends

I recommend that you avoid broaching the subject head on. Try to raise the subject in general among friends (not family). Alternatively, read about the subject on the internet and refer your spouse to an article that supports entering an agreement (including this article).

Second stage – discussion between the couple

Shortly after raising the subject between friends or during the discussion, express your opinion to your spouse. Say that the subject seems important to you and emphasize that it will benefit both of you (and it will).

Third stage – convincing your partner

If your partner opposes to the subject, let him/her be, but a few days later (not more), bring the subject up again. Tell your partner you read about it, consulted with friends and would like him or her to respect your wishes and for both of you to consult with an attorney specializing in financial agreement, to receive more details and then decide how to proceed. Don’t get into futile arguments with your partner.

Fourth stage – choosing the correct attorney to prepare your financial agreement

This is the decisive stage. You must carefully select a suitable attorney to handle your financial agreement "from the first attempt", since if the attorney you choose fails to conclude an agreement, this will only expand disagreements and force you to chase after more attorneys, which will only add unnecessary strain and efforts.

How to choose an attorney to prepare a financial agreement between spouses?

Only a positive connection with an attorney, will give you both a sense that your agreement gives you peace of mind. So how do you choose the correct attorney?

Choose only an attorney specializing in financial agreements

Before choosing an attorney to prepare the financial agreement, ask around. Visit the attorney's website, check if he or she only engages in preparing financial agreements or is a "jack of all trades" – a general attorney who also deals with execution cases, real estate or criminal law. You do not want such an attorney to handle your agreement; you want someone who only deals with financial agreements and not an attorney who has so many areas to work on, that preparing a financial agreement is "by the way" for him or her.

Choose an attorney who has already prepared hundreds of financial agreements

The more an attorney meets with couples and prepares financial agreements, the more he or she learns from them and perfects his professionalism. The attorney also becomes more sensitive to such issues and improves his patience and consideration. An experienced attorney gathers special skills and learns how to handle unexpected crises during a meeting, how to navigate so that both spouses feel that can place their full confidence in that attorney and enable him or her to bring up creative ideas for solving disputes (quite difficult disputes at times).

Get an impression of the attorney by telephone call

Speak to the attorney on the phone, have a lengthy conversation: fifteen to thirty minutes. Ask questions and then, trust your intuition. Nothing can replace your personal impression. You will learn whether the attorney has patience, seems pleasant, open, understanding, professional, sensitive and capable of catering the agreement to your needs.

Choose the attorney together

After the telephone conversation with the attorney, don’t schedule a meeting yet. Share your impressions from the conversation with your partner and give them an opportunity to also speak to the attorney, to see whether the attorney suits them too. Choosing an attorney to prepare a financial agreement together is important, even if your partner tells you to choose whomever you want. If you don’t make the choice together, if only your partner speaks to the attorney, you will not know what was said in the conversation, which topics already came up and were handled. There aren’t enough words to stress how important this is – it is the key. Both of you should get an impression and both of you should choose who you want to place your trust with.

Read articles written by the attorney on financial agreements

Read about the attorney on his or her website and the internet. Look for articles he or she wrote on financial agreements. Search the attorney's name on Google combined with the word "article" or "articles" and together with "financial agreement between spouses", for example: "Uri Ganor article financial agreement".

The extent of articles published by an attorney on the issue of financial agreements and their content, will attest not only to his professional skills, but also to his or her personality. Notice the style of the articles and read "between the lines" to discover what spirit lies behind.

Get recommendations regarding the attorney

Read recommendations from the attorney's clients published on the internet website. Ask the attorney for telephone numbers of clients (this isn’t always an option since many couples don’t want others to know they signed a financial agreement). Check the names of recommenders, do you know any of them?

Don’t choose an attorney who is friends with one of you

Both of you have to be convinced that you chose an objective and neutral attorney. If the attorney is friends with one of you, how can the other trust him or her?

Choose one attorney, not two

Since you have conflicting interests or various opinions regarding financial arrangements, you might think its best for each party to hire a personal attorney. This is a common mistake. Two attorneys can easily, even without intending to, make your differences more pronounced and complicate matters. Each one will "pull" to his or her direction and will prevent a more flexible approach. It is important that you choose one attorney whom you both trust.

Approving a financial agreement

An attorney can approve a financial agreement before four instances: the Family Court, the Rabbinical Court, a Notary or the Registrar of Marriages. As for married couples, jurisdiction for approving a financial agreement is awarded to the Family Court and the Rabbinical Court.

Below please find an extensive article on critical distinctions between the various types of approvals.

Uri Ganor – Prenup Lawyer in Tel Aviv / Israel.