Dissolving a partnership and resource balancing: how property is divided on divorce
Dividing property on divorce rests on two distinct mechanisms that are easy to confuse. Resource balancing determines how much each party is entitled to. Dissolution of a partnership is the way a particular asset, chiefly the family home, actually stops being jointly held.
“Many cases are run as though the question were who gets the apartment. In practice the first question is what enters the balancing at all, and the second is when the apartment is sold and where the children go.”
Adv. Ester Efrati · Head of the Family and Inheritance Department
Two mechanisms, not one
On divorce people speak of “dividing the property” as though it were a single step. In practice there are two distinct mechanisms, arising from two different statutes, and each answers a different question.
- Resource balancing. It comes from the Spouses (Property Relations) Law and answers the question how much each party is entitled to: which assets enter the calculation, what they are worth, and what difference passes from one side to the other.
- Dissolution of the partnership. It comes from the Land Law and answers the question how a particular asset registered in both names stops being jointly held: sale, one party buying out the other, or division in kind.
The distinction is not theoretical. It is quite possible for the entitlement under the balancing to be fifty per cent while the proceeds of the apartment are divided differently, because they are set off against other assets, against debts, or against a maintenance obligation.
So when running a case it is better not to start from the apartment. Start from the full picture: what enters the balancing and what it is worth, and only then decide what to do with each asset. See also marital property agreement.
What enters the balancing and what does not
Where there is no marital property agreement, the statutory resource balancing arrangement applies. Its basic principle is simple: during the marriage each spouse remains the owner of his own property, and only on dissolution is a calculation made and a difference transferred.
What enters: everything accumulated during the marriage, including assets, savings, pension rights and funds, even where registered in one name only. This surprises people most, and it is sometimes the largest item in the case, larger than the apartment.
What does not enter:
- Assets each spouse held before the marriage.
- Assets received by gift or inheritance during the marriage.
- Certain benefits and payments for personal injury.
- Assets the parties agreed in writing would not be balanced.
Alongside this, an asset outside the balancing may still become joint where a specific intention of sharing is proved. That happens mainly with an apartment that served for years as the family home, or in which joint funds were invested. The burden lies on the party asserting it, but the claim does succeed in cases.
The first stage in every case is therefore mapping: a schedule of assets, dates of acquisition, source of funding, and in whose name each stands. Good mapping saves half the litigation.
Early balancing before the divorce
The basic rule is that balancing takes place on dissolution of the marriage. For years that made it a lever: a party who did not want to divorce could also hold up the division of property.
The statute was amended, and since then resource balancing may be sought even before the marriage has been dissolved. The application is not automatic and is subject to conditions, among them that a period has passed since proceedings began or that the couple have lived apart for a cumulative period the statute sets.
In addition the court may shorten those periods in exceptional circumstances, for example where there is domestic violence or a protective order. See economic abuse and restraining order.
The practical significance matters. Refusal to divorce no longer entirely blocks the division of property, and the financial track can move forward even while the religious proceeding is stuck. This is worth checking early rather than after two years of waiting.
When the court departs from an equal division
The default is an equal division of the value of the assets accumulated. But the statute empowers the court to depart from it in special circumstances, and that power is exercised in practice.
What the court may do:
- Provide that a particular asset is not balanced, or is balanced only in part.
- Fix a different ratio than half and half.
- Fix a different valuation date for the assets.
The central consideration the statute mentions is each party’s future earning capacity. Two issues meet here: a large gap in earnings between the parties, and assets that are not registered as property yet have real economic value, such as professional goodwill or a degree obtained during the marriage. See career assets and goodwill.
What matters is this: a departure is neither a punishment nor a prize. It is a tool for correcting an outcome that looks equal on paper but is not equal in practice, for example where both parties receive the same sum but one leaves with an established career and the other with years devoted to the home.
Dissolving the partnership in the home
The Land Law provides that any co-owner of jointly held land is entitled at any time to demand dissolution of the partnership. That is the starting point, and three practical routes follow from it.
- Sale to a third party. The asset is sold on the market and the proceeds divided. This is the most common route where there is no agreement.
- One party buying out the other. One party stays in the apartment and pays the other the value of his share. Where there are children this is usually the least damaging route, and it depends on the ability to finance and on the bank agreeing to a new mortgage.
- Division in kind. Physically dividing the asset in two. In a dwelling this is almost always impossible for planning reasons, so it is relevant mainly to land or to a building that can be split.
Where division in kind is possible but the parts are unequal in value, the court may order balancing payments to equalise them.
Dissolution between spouses carries a layer that a commercial dissolution does not: the outcome is also examined through family law. The division of proceeds therefore does not necessarily follow the registered ownership shares, and it is set off against the other elements of the settlement.
Protecting the children’s roof
This is the most important provision in this chapter, and it is what dictates the timetable in practice.
The Land Law provides that where the court orders dissolution by way of sale of a couple’s dwelling, execution of the sale is stayed so long as the court is not satisfied that another housing arrangement suited to their needs has been found for the minor children and the parent who has them, including a suitable temporary interim arrangement.
Three practical consequences:
- An order for dissolution is not the same as an immediate sale. A judgment may be obtained and the sale still stayed for months.
- The housing solution is part of the case. A party seeking dissolution who wants it carried out should bring a realistic housing answer, not only a demand to sell.
- An interim arrangement can be built. For example depositing part of the proceeds with a trustee to secure housing for the children.
Alongside this, the court may also stay the order for dissolution itself, where the stay is needed in order to settle the whole set of issues between the parties rather than one issue alone. That flexibility exists to prevent a quick dissolution of the apartment from dictating the entire settlement.
The forum and specific residence
The financial side of a divorce may be heard in the family court or in the rabbinical court, where it was properly joined to the divorce action. The choice is not technical, and it carries one concrete consequence worth knowing.
Specific residence. Jewish law recognises a wife’s right to continue living in the home in which she lived, and not to descend to a lower standard of housing. Where that right is upheld, the rabbinical court may decline to order dissolution by way of sale.
- The remedy is granted in the rabbinical court only. The family court, applying civil law, does not grant it.
- It derives from the personal law and from the ketubah, and it is not symmetrical: it is available to the wife and not to the husband.
- It is not automatic, and it is examined on the circumstances of the separation.
The practical conclusion is clear. A wife who wishes to remain in the apartment needs to know that this remedy does not exist in the family court. And a husband seeking dissolution needs to know that the choice of forum can change the outcome.
Because the forum is settled at a very early stage, sometimes by whoever files first, this is a decision to take on advice rather than on instinct. See request for dispute resolution and the divorce process.
How it works in practice
Between judgment and money in the account lie stages that tend to take longer than the parties expect.
- Valuation. Where there is no agreement, a surveyor is appointed. The same value serves both for a sale and for calculating the buyout of the other party’s share.
- Receivership. Where one party holds up the sale, the court appoints receivers, sometimes counsel for the parties, who conduct the sale in their place.
- The mortgage. Any mortgage is discharged from the proceeds. A party buying out the other usually needs a new mortgage, and this is the stage that can defeat an arrangement that looked settled.
- Tax. A transfer of rights between spouses incident to divorce, under a judgment or an approved agreement, is not treated as a sale for land taxation purposes. To be precise: this is deferral rather than cancellation, and on a future sale the gain is computed from the original date of acquisition. See selling an apartment on divorce.
Two recurring mistakes: signing an arrangement without checking mortgage approval in principle first, and drafting a sale clause with no timetable and no mechanism for a party who does not cooperate.
Summary
Dividing property on divorce is two steps rather than one: resource balancing, which determines how much, and dissolution of the partnership, which determines how a particular asset is separated.
Three points are worth taking from here. First, pension rights and savings enter the balancing even where held in one name, and are sometimes the largest item in the case. Second, early balancing may be sought even before the marriage has been dissolved. Third, a judgment for dissolution is not an immediate sale, because the statute stays execution until suitable housing has been found for the children.
If you are before proceedings, or hold a judgment that is not moving, contact us to review the full picture.
What people ask most often
What is the difference between resource balancing and dissolving a partnership?
Resource balancing determines how much each party is entitled to out of everything accumulated, and comes from the Spouses (Property Relations) Law. Dissolution of a partnership is the way a particular asset registered in both names stops being jointly held, and comes from the Land Law. One can be entitled to half and still see the apartment proceeds divided differently, because they are set off against the other elements.
Do pension rights enter the division?
Yes. Pension rights, funds and savings accumulated during the marriage enter the balancing, even where registered in one name only. They are sometimes the largest item in the case, larger than the apartment.
What does not enter the balancing?
Assets each spouse held before the marriage, assets received by gift or inheritance during it, certain benefits and payments for personal injury, and assets the parties agreed in writing would not be balanced.
Can property be divided before the divorce itself?
Yes. The statute allows resource balancing to be sought before the marriage is dissolved, on the conditions it sets, and the court may shorten those periods in exceptional circumstances such as domestic violence. Refusal to divorce therefore no longer entirely blocks the financial track.
Is the division always half and half?
That is the default, but the statute empowers the court to depart from it in special circumstances: to fix a different ratio, to exclude an asset, or to fix a different valuation date. The central consideration the statute mentions is each party’s future earning capacity.
Who can demand dissolution, and when?
The Land Law provides that any co-owner of jointly held land is entitled at any time to demand dissolution. Where the asset is a couple’s dwelling with children, the statute adds limits on how it is carried out.
The court ordered dissolution. Is the apartment sold immediately?
Not necessarily. Where the asset is a couple’s dwelling, execution of the sale is stayed so long as the court is not satisfied that another housing arrangement suited to their needs has been found for the minor children and the parent who has them, including a temporary interim arrangement.
Can one party stay in the apartment and buy out the other?
Yes, and where there are children this is usually the least damaging route. It depends on an agreed value or a valuation, and on obtaining a new mortgage. It is worth checking approval in principle before signing the arrangement.
What happens when one party holds up the sale?
The court may appoint receivers, sometimes counsel for the parties, to conduct the sale in the parties’ place and under its supervision.
What is specific residence?
A right recognised in Jewish law under which a wife continues to live in the home in which she lived and does not descend to a lower standard of housing. Where it is upheld the rabbinical court may decline to order dissolution by sale. The remedy is available in the rabbinical court only and does not exist in the family court.
Is there tax on transferring the apartment between the spouses?
A transfer of rights between spouses incident to divorce, under a judgment or an approved agreement, is not treated as a sale for land taxation purposes. To be precise: this is deferral rather than cancellation, and on a future sale the gain is computed from the original date of acquisition.
What should be prepared before starting?
Full mapping: a schedule of assets and rights, dates of acquisition, source of funding, in whose name each stands, mortgage and loan balances, and documentation of joint investment in an asset brought into the marriage. Good mapping saves a substantial part of the litigation.
All pages in the Family and Inheritance department
The separation itself
The divorce processLeaving home before divorceReconciliation or divorceRequest for dispute resolutionDissolution of marriageEconomic abuseRestraining orderBreach of a divorce agreementThe children
Child supportChild support claimIncreasing or reducing supportSupport for a child born outside marriageCollecting support through National InsuranceSpreading a maintenance debtCustody and parenting timeShared parentingThe tender years presumptionChanging a custody arrangementRelocating abroad with the childrenParental alienationDealing with an alienating parentGuardian ad litemSurrogacyPaternity claimThe Youth (Care and Supervision) LawVisual parenting plan builderProperty and agreements
Prenuptial agreementSame sex prenuptial agreementSame-sex marriageNotarised prenuptial agreementDissolution of joint ownershipCareer assets and goodwillSelling the apartment on divorceCommon law partnersInheritance and estate planning
Wills and inheritanceInheritance between same-sex partnersEstate planningWills in estate planningIntergenerational transfer in estate planningTrustsDynasty trustSpecial needs trustInheritance orderProbate orderAgreements between heirsInheritance disputes between siblingsContesting a willNo-contest clause in a willLet us start from the full picture, not from the apartment
A short consultation meeting with a lawyer from the department, mapping what enters the balancing, what it is worth, and the right way to separate from the jointly held asset.