Dividing an apartment among heirs – what to do if the division is not specified in the will
What happens when the division of assets in the will is not acceptable to the heirs, and they want to transfer parts of the inheritance to other heirs? Are there ways to transfer part of an apartment without paying tax and how does dividing an apartment among heirs work when the process is not specified in the will?
In this article we will examine the case of inheriting an apartment and dividing it among heirs, and explain how you can change the way the inheritance is distributed, and when you can avoid paying tax on the transfer.
Our law office specializes in family and inheritance law, including cases of redistribution of estates. If you have any questions on the subject, you are welcome to contact us and we will be able to assist you with professionalism and expertise that will enable you to come to an agreement on the division of the property without undue distress.
When can the division of the estate be changed?
In most cases, a will specifies instructions on how to divide the estate among the heirs. That is, it determines which part of the estate will go to a specific heir and which parts will go to other heirs. If the deceased did not leave a will or if the will does not specify how the apartment is to be divided among the heirs, the division is determined according to the Inheritance Law. Half of the apartment will go to the spouse of the deceased and half will go to the children of the deceased or the parents of the deceased if they are still alive.
However, if the heirs believe that a different division of the assets is required, they can request this through an estate division agreement. This is according to Section 110(a) of the Inheritance Law which states that the assets of the estate will be divided between the heirs according to an agreement made between the parties or according to a court order.
An estate division agreement can benefit the heirs in the event that they wish to change the division of an apartment after the inheritance, as it allows avoiding the payment of appreciation and purchase tax. This possibility exists because inheriting an apartment is not considered an act of selling or buying real estate. However, there are also other options for dividing an apartment that enable heirs to avoid paying various taxes on the value of the apartment.
It is important to know that the division agreement can only be submitted before ownership of the apartment is transferred to the heirs.
In cases where the heirs wish to change the distribution of the estate but they do not agree on the manner of division, they have the option of seeking a solution through the court. Thus, instead of the heirs themselves deciding the new manner of division, the court will determine it and anchor the decision in a decree.
When there is an executor, a person appointed to manage the estate after someone’s death, he is empowered to propose a division agreement to the court himself, even without the consent of all the heirs.
It is very important to draw up the estate division agreement with the assistance of an attorney who will ensure a division anchored in the law, because this will best serve your interests. In addition, a signed division agreement cannot be easily annulled, therefore it is important that the agreement be drafted precisely and agreed upon without reservations, in order to avoid the need to go through the complex and lengthy process of annulling it.
Possibilities for changing the division of an apartment after the death of the testator
Now we will examine the various options for the division of an asset after the death of the testator, in a way that enables avoiding payment of various taxes such as capital gains tax and sales tax.
You should know that in cases where the division of assets includes a payment that is not from the inheritance funds, these funds will be taxed. For example, if three brothers divide an asset and funds from the bank account of the deceased between them, and they decide that the asset will go to one brother, the funds from the bank account will go to the second brother and these two brothers will transfer a certain amount of money to the third brother from their pockets, then the amount of money that is transferred to the third brother will be taxed.
However, there are ways to obtain an exemption from tax even in cases like this. For example, there is an exemption from appreciation tax on the sale of an apartment if it is the sole apartment belonging to that person. The reason why the first brother is entitled to an exemption in this case is that the testator’s apartment was partly in his possession and he supposedly sold it to his brother.
Withdrawing from the estate as a solution to dividing an inheritance
Another option for changing the division of inheritance without paying appreciation tax or purchase tax is through a process called withdrawing from an estate. According to section 6 (a) of the Inheritance Law, after the death of the testator and before his estate is distributed to the heirs, an heir may announce his withdrawal from all or part of the estate. That is, one of the heirs of a share of an apartment can relinquish part or all of his inheritance.
It is important to note that according to Section 6 (b) of the Inheritance Law, a person who has chosen to withdraw from the inheritance cannot do so in favor of another person who is not the heir’s spouse, children or siblings. That is, a person cannot transfer the part of the estate from which he chose to withdraw to any person, but only to the deceased’s legal heirs.
Withdrawing from the estate enables the heir to circumvent the terms written in the will. For example, if one wants to transfer a bequeathed part of an apartment to another legal heir, one can bypass the terms of division set forth in the will or in the Inheritance Law.
Selling the apartment after the division of the inheritance
After the inheritance, i.e. the inherited apartment, has been divided, it is not possible to draw up an estate division agreement among the heirs. Therefore, a different course of action is required to transfer parts of the apartment to the other heirs. One of the options is to sell the apartment, an act that is subject to the laws of real estate taxation and real estate law.
When real estate is sold, there is a tax that the seller is required to pay, which is called appreciation tax. Therefore, when one heir sells his share to another heir, he will have to pay appreciation tax. However, there are legal ways to avoid paying this tax, in some cases:
One option for exemption from appreciation tax as we presented it earlier is an exemption for a single residential apartment. When the apartment sold is the seller’s only apartment, there is a possibility of waiving the appreciation tax.
Another option for a possible exemption from appreciation tax is the sale of a residential apartment that was inherited. That is, a sale between an heir of the apartment and an outside person who is not an heir can be exempt from appreciation tax in accordance with the conditions set forth in the law.
It is important to note that even on the purchase of a property there is a tax that must be paid, called purchase tax. However, there are also options for the buyer to avoid paying purchase tax. For example, if the purchased apartment is the buyer’s only apartment in Israel, there are reduced rates of purchase tax applied to the transaction.
Dividing an apartment between heirs – don’t forgo professional assistance
As you have seen in this article, dividing an apartment between heirs after the death of the testator can be done in a variety of ways. If you want to avoid paying taxes such as appreciation tax or sales tax, it is important to plan the transfer of the parts of the apartment in an informed and professional manner. Therefore, it is recommended to leave the task in the hands of an experienced and skilled attorney, who knows the relevant laws inside and out.
Also, it can be seen that the division of an apartment may be affected by both inheritance laws and real estate laws. Therefore, for best results in this complex transaction, it is important to choose a law office that specializes in both of these areas of law.
Our offices, located in Tel Aviv and Jerusalem, specialize in inheritance and wills as well as real estate law. Therefore, we are able to offer our clients the most powerful legal tools to effectively manage cases of apartment division between heirs. If you have any questions regarding the process or you want to consider your best course of action, you are welcome to contact us and we will be glad to assist you.
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