The heir-after-heir rule
A last will and testament is the best instrument to regulate the transfer of assets between generations and to avoid future conflicts. Israel’s Succession Law allows the testator to determine the identity of the heirs to the estate as well as the various conditions for inheritance. Wills may include special arrangements such as the heir-after-heir arrangement. The following article will explain what an heir-after-heir arrangement is and its terms and restrictions.
What is an heir-after-heir will?
The purpose of the Succession Law is to provide the testator optimal conditions for the transfer of assets as the testator sees fit. Based on this concept, section 42 of the Succession Law clearly sets the conditions for an heir-after-heir arrangement:
- (a) “The testator may bequeath [the estate] to two heirs so that the second heir is a beneficiary of the will after the first heir; the second beneficiary will become entitled upon the death of the first beneficiary or upon the fulfillment of certain terms or on the date stipulated in the will, whichever is earlier.”
The heir-by-heir rule allows the testator to transfer the estate to a first heir and then to a second heir, when the first one dies or when another condition for the transfer is met, as stipulated by the testator in the will.
Section 42(b) defines the scope of application of the will of the first heir and sets restrictions to ensure the rights of the second heir:
“The first heir is entitled to do as they please with the estate, and the second heir will only inherit what remains from the first; however, the first cannot detract from the right of the second by will.”
Therefore, until the death of the first heir or the fulfillment of the terms of transfer, the first heir is entitled to treat the inheritance as they please, for all that may imply. However, the first heir may not bequeath the assets in possession thereof to anyone else.
In appeal no. 598/75, Judge Landoy clarified the vague definition of the scope of the first heir’s obligation: “The spirit of any such heir-after-heir will and testament is that the first heir preserves the assets to the extent possible and as mandated under the circumstances, for the benefit of the second heir. However, this is only a moral obligation, not a legal obligation.”
In other words, the court held that the first heir must act according to general rules of morality in respect of the assets inherited by the first heir, and which are intended to pass to the second heir in the future. However, the outline set by Judge Landoy has no legal force and may only be used in the framework of a “lack of good faith defense.”
It is important to note that the law limits this heir-after-heir arrangement to no more than two heirs.
Are there any additional restrictions on the first heir?
The law imposes a single limitation on the first heir and that is not to detract from the share of the second heir by preparing a will. That is, the first heir cannot bequeath the inherited property to another person but can transfer it to another person by gift or loan.
Although the law affords the first heir broad freedom of action in respect of the inherited property, section 42 of the Succession Law is subject to the language of the testator’s will, so if the testator sets restrictions on the use of the assets, the heir must respect them.
The testator may limit the actions of the first heir in the will in respect of the property. Thus, the testator can impose a restriction on giving away the inheritance as a gift or the transfer of the inheritance to another person during the lifetime of the first heir. Often, the testator will do so to prevent the first heir from harming the second heir’s share.
Can the first heir transfer the inheritance to another person as a gift?
Yes. Even though it seems that this is an option that goes against the law’s objective to protect the rights of the second heir, the court recognizes the option of transferring an inheritance to another person as a gift as part of the right of the first heir to treat the inheritance as they please.
It seems that the legislator limited the first heir to the minimum possible and left plenty of room for the testator to determine the terms of the inheritance liberally. This is why the testator and lawyer thereof should know that if they want to protect the rights of the second heir, they must explicitly restrict the first heir in the will.
What are the inheritance restrictions that apply to the first heir?
In most cases, it is possible to issue a restraining order against any action that goes against the testator’s instructions. However, it is recommended to contact a lawyer who specializes in inheritance matters to ensure preventative action against the violation of the testator’s instructions.
For example, if the testator imposed restrictions on the sale of an apartment or pledge thereof, in order to ensure the rights of the second heir, it is advisable to write a warning note about the restrictions in the land registry in advance. The warning note can be removed after the end of the succession arrangement or the death of the first heir.
Can the second heir protect their share of the inheritance without an explicit instruction in the will?
No. As stated earlier, the provisions of the Succession Law are subject to the intention of the testator and the language of the will. Apart from the protection in the law that prevents the first heir from bequeathing the inheritance, the second heir has no other counter claim.
Does the second heir have the right to profits from the inheritance made by the first heir?
Yes. The second heir is entitled to inherit from the first heir the assets of the inheritance and the profits generated therefrom during the period in which the first heir held them. Similarly, the second heir has a right to assets that will be exchanged during the period of possession of the first heir. For example, if the first heir sold an apartment that was transferred under the estate and bought another apartment with the proceeds of the sale. The second heir has a proprietary right to the new apartment.
If assets are transferred during the possession of the first heir, the matter will have to be tried in court to determine the monetary value payable to the second heir. For example, where the first heir sold the inheritance apartment and bought a new apartment with the proceeds of the sale and his or her personal money.
What happens in the case of the death of the first or second heir before the transfer of the inheritance?
Section 49 of the Succession Law states:
“A beneficiary according to a will who died before the testator where the testator did not designate another person instead, if at the time of the death of the testator there are descendants of that beneficiary, they will be beneficiaries. In any other case the provisions of the will in favor of that beneficiary are canceled.”
That is, the right of an heir who died before the testator expires, unless there are descendants who are entitled to inherit the estate according to law.
Note that this does not refer to natural heirs according to law, such as a spouse and parents, and this provision of the law is valid only towards the descendants of the deceased, i.e. children and grandchildren. In the event that these do not exist, the inheritance will be divided according to the provisions of the Succession Law or general provisions left by the testator in the will.
Can the first heir waive his right in favor of the second heir?
Yes. Section 42 of the Succession Law allows the first heir to submit a withdrawal affidavit that will allow them to transfer the inheritance directly to the second heir. A classic example of the situation is an heir who ordered all his assets to be transferred to his wife, and only then to his children. The wife of the heir can submit an affidavit of withdrawal and transfer the inheritance directly to her children/children of the testator.
However, the court has the right to reject such a withdrawal affidavit due to a claim that it was made in bad faith. For example, in a situation where the withdrawal was intended to prevent the testator’s debtors from collecting their debt from the estate or in a situation where the withdrawal was made for consideration.
Wills and inheritances may raise complicated questions. Our lawyers in Tel Aviv and Jerusalem are experts in inheritance law and are happy to be at your service. Schedule an appointment at our office for more information and legal advice.
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