Inheritance tax and inheritance law in Israel
Taxation Researcher | July 20, 2020
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Israel: what restrictions there are and whether making a will is advisable.
There are no inheritance taxes in Israel.
Thanks to Amos Hacmun, Adv. of Heskia-Hacmun Law Firm
What inheritance laws apply in Israel?
Courts in Israel have jurisdiction over inheritance of property in Israel.
The main law governing inheritance matters in Israel is the Inheritance Law 5725 (1965) which provides that Israeli courts have jurisdiction over inheritance matters, in either of the following circumstances:
- The deceased´s domicile at the time of his death was Israel
- The inheritance includes property in Israel
In both cases, the Inheritance Law does not differ between Israeli citizens and foreigners whether as the devisors or as the devisees.
If the deceased was domiciled in Israel, Israeli courts are competent to rule any inheritance conflict, even if the inheritance does not include property in Israel. Moreover, Israeli courts are competent if the inheritance includes property in Israel, even if none of the parties involved has any relation to Israel.
Foreign inheritance laws may apply, but not if they grant inheritance rights to those not related to the deceased by blood, marriage, or adoption.
If the foreign law of the deceased´s domicile or nationality refers to Israeli law, then the Inheritance Law shall apply in all matters determined by the foreign law; however, the Inheritance Law forbids appliance of a foreign law if such law is discriminating on grounds of race, religion, gender or nationality. In addition, such foreign law is not applicable if it grants any legal inheritance rights (i.e., except by way of a last will) to inheritors who are not related to the deceased by blood, marriage or adoption.
The Inheritance Law determines that in case an estate includes property outside the boundaries of the State of Israel, the applicable law shall be the law of the deceased´s domicile at the time of his death. In inheritance matters, the applicable law is the local law of the country where the property is located (lex situs) without distinguishing between the kind of property. If lex situs applies to foreign property, then the Inheritance Law acknowledges this fact and the lex situs law applies, except in cases where lex situs discriminates grounds of race, religion, gender or nationality. In such case the Inheritance Law applies.
The Israeli Inheritance Register has the authority to issue inheritance orders and to probate wills. When a foreign element is involved, i.e. foreign law or party, or in case of inheritance disputes, the file is transferred to one of Israeli five Family Courts which are the competent courts to rule in inheritance matters.
The duration of inheritances cases depends on their complexity and the existence of legal disputes between the inheritors. It can last between several months to years.
A person is entitled to leave property to anyone he/she wishes in a will. In the absence of a will, the Inheritance Law determines the successors.
A person is entitled to leave property to anyone he/she wishes in a will.
In the absence of a will, the Inheritance Law determines that the estate should be distributed between the deceased´s close relatives, dependant upon how close their blood relations were with the deceased. Heirs of the first degree inherit first. Potential heirs of the next degree inherit only if there are no heirs on the closer degree.
The surviving spouse is entitled to receive the deceased´s car and movable assets as well as half of all the property of the deceased, while the other half is remains for the deceased´s children, grandchildren or parents. In case the deceased had brothers and sisters but no children, then the surviving spouse is entitled to 2/3 of the estate. The rest is divided between the deceased´s siblings.
In the absence of any of the above relatives the estate is distributed between the existing relatives, as described above.
If no relatives exist at all, the estate is transferred to the State of Israel for the benefit of the public.
It is recommended to prepare a will in Israel.
In the last 5 years, the number of probate decrees was almost equal to the number of inheritance orders (based on officially published statistics). Almost half of the deceased who were domiciled or had property in Israel prepared a will prior to their death.
The will expresses the true desire of the deceased and it is recommended to prepare one if there are special requests, instructions or orders to his heirs. Israeli Inheritance Law encourages the certainty involved in wills, and recognizes the validity of handwritten wills, in front of witnesses, in front of a notary or judge or even oral wills under certain conditions. Israeli Courts expressed their opinion that as long as a person´s desire and sanity is proven, no technical objections to a will can be accepted.
In addition, a will is valid in Israel if it is considered valid by Israeli Law, the local law in the place where it was prepared, the deceased´s domicile law, or the law of the deceased´s citizenship by the time he prepared the will or at the time of his death.
Other than by will, Israeli Inheritance Law forbids having any agreement or future transactions during the lifetime of the property-owner concerning the property status or ownership after the death of the property-owner.
Ownership rights of real estate must be registered.
Israeli law distinguishes between ownership of real estate and the ownership of other assets and applies only to assets located in Israel.
Full ownership rights in real estate assets are granted to the entity registered as the asset owner in the official Land Registration Records. The ownership of any other kind of assets (movable goods, intellectual property, etc.) does not require official registration and can be proven by different manners such as possession, contract, behaviour, etc.
The surviving spouse has property rights.
The estate of a deceased is subject to prior established property rights. In the specific case of a married spouse, the estate left by a deceased is subject to the rights acquired by the spouse prior to the deceased´s death. Normally, in the absence of specific exclusions or a other agreement, there is a presumption of joint ownership between spouses and therefore, even if the spouse´s name is not written as the owner of a certain asset, the rights of the spouse should first be clarified before determining the assets included in the estate.
A guardian is appointed for minors and others without legal capacity to inherit.
In case the heir of a property does not have the legal capacity to inherit, such as when the heir is an infant, or mentally disabled, a guardian is appointed for the property for the benefit of the heir. It is possible to appoint the guardian in the will itself, but such appointment is subject to court´s approval and the court can determine of a more appropriate person to serve as the guardian. The natural guardians are the child´s parents, but the entire designation procedure is supervised by court that seeks the heir´s best.