Cohabitation Agreement or Prenuptial Agreement?

Cohabitation Agreement or Prenuptial Agreement?

Doron Afik, Esq.
June 3, 2023

Sometimes a couple wish to have a full marital relationship but do not wish to marry (or cannot marry under Israeli law, such as same-sex couples) - can they still regulate their relationship by a prenuptial agreement that will prevent future conflicts between them regarding the joint property? And what happens if later they decide to get married?

Israeli law generally provides for a resource balancing arrangement, under which assets of the spouses are deemed to belong equally to both, regardless of how they were recorded. Accordingly, an apartment purchased by a married couple and recorded in the husband's name only will be deemed to belong to both equally, regardless of the reason for which it was recorded in the name of only one of them. Spouses often prefer to create a different arrangement between them, which is more suitable for their relationship, and sometimes will even arrange the "breaking up of the package" if such will be required in the future, and for this purpose the tool of a prenuptial agreement exists.
A prenuptial agreement between a married couple must be approved in Court in order for it to be valid (although in some cases the Courts found that when the parties acted according to an agreement that was not duly approved they may still be bound by it), however a prenuptial agreement made before the marriage can be verified by a notary public and will still have a binding effect that exceeds the legal presumption of equal sharing of assets. But what about a couple who is not married and has no intention of getting married?

For example, in a case discussed in March, 2023, in the family court in Rishon Lezion, there was a couple who signed an agreement that bore the title of a "prenuptial agreement" and was even approved in Court, even though at that stage the couple had no intention of getting married. The agreement stated that an asset to be recorded in the name of one will be his alone. Later, after they got married, they bought an apartment with joint funds, but it was recorded in the husband's name only. The Court decided that the agreement that was validated by the Court was not a prenuptial agreement but a cohabitation agreement and it does not override the presumption of sharing and the wife is entitled to half of the apartment.

A cohabitation agreement is not a prenuptial agreement but rather a contractual arrangement between the parties, the preparation of which before a notary and perhaps even its approval in Court gives it stronger validity. Such an agreement is a desirable arrangement in the case of an unmarried couple, as it creates legal certainty between the parties, but if the couple decide in the future to marry, it should be replaced by a prenuptial agreement, to prevent the entry into force of the presumption of sharing. While there are cases where a cohabitation agreement was deemed to continue to be binding due to the rule of good faith and estopple and will prevail over the presumption of sharing, it is advisable not to rely on retrospective interpretation.

It is advisable to draft the arrangement by a notary with experience in the field and, as far as the agreement also concerns ownership in corporations or businesses, also with experience in such field. Due to the sensitivity of the subject matter, financial savings when signing a cohabitation agreement or a prenuptial agreement may cost huge amounts in the future and therefore it is better to pay a little more but know that the rights are well protected.