Inheritance Law in Israel – an Overview
Any Israeli resident would benefit from having a better understanding of inheritance law in Israel. Every adult should write a will and begin estate planning in preparation for the future. In this article, I will explain several aspects of Israeli inheritance law from my perspective as an Israeli probate attorney (a lawyer who specializes in inheritance law and estate planning). You will learn about topics such as:
- What happens to someone’s property in Israel if they pass away without a written will?
- How to write a last will and testament.
- Whether you should establish trusts and endowments.
- What an estate executor is and whether you should appoint one.
- How can heirs claim their inheritance?
Our law firm has a diverse team of lawyers who specialize in various fields of Israeli civil law, including probate and inheritance law. If you have more questions on the topic of wills and inheritance, contact us at [email protected] or call 03-3724722. We will be delighted to hear from you and provide you with expert legal advice.
Estate planning in Israel
Estate planning refers to all the arrangements a person should make in preparation for their eventual passing. Writing a last will and testament is the cornerstone of good estate planning. It also includes the appointment of an estate executor, the potential creation of fiduciary trusts via the will, instructions for the funeral and burial, and arrangements for any dependents.
Inheritance by law – understanding the Israeli Inheritance Law
When an Israeli resident, or any person with assets in Israel, passes away, the probate courts distribute the inheritance to the heirs according to the 1965 Israeli Succession Law. The heirs become the legal owners of the estate the moment their relative passes away. Nonetheless, they can only actualize their ownership rights once the estate is divided among the various heirs.
Inheritance law in Israel – Intestacy explained
According to the Succession Law, the probate courts have jurisdiction over the distribution of any bequeathed assets. The division of the assets will follow the will written by the now-deceased testator. (A person who writes a will is called a testator, “moreesh” in Hebrew).
Intestacy is the legal term for a case in which a person passes away without leaving a will. The Inheritance Law prescribes the order of heirs and the way in which the assets are divided in the absence of a will. Inheritance without a will is called inheritance by law, also known as intestate succession.
The order of heirs according to the succession law in Israel
Note that the law in Israel does not guarantee that the spouse of a deceased person will inherit all their assets. The spouse will inherit the entire estate only if the testator commands it in their will. In cases of intestacy, the widow or widower will inherit the joint place of residence, its furniture and household items, and the household vehicle. Not included are bank accounts, other real estate properties, financial assets, personal belongings, and anything other than the shared home and vehicle. The spouse will generally inherit only half of this part of the estate. The children (or grandchildren) inherit the rest.
If the deceased person has no direct descendants, half of the inheritance passes on to their parents. In the absence of any descendants or living parents, the spouse inherits two-thirds of the estate, and the rest passes to the siblings, nieces, nephews, or grandparents. If the intestate person was unmarried at the time of their death and had no immediate living relatives, the State of Israel claims the entire estate. (The default prescribed line of succession is only relevant when there is no written will.)
Inheritance by will
You should write a will (“tzava’a” in Hebrew) as soon as possible. By writing a will, you control the future ownership of your estate and can spare your heirs a cumbersome legal process. The will does not need to follow the default order of heirs in the Israeli Succession Law. You may instruct the courts to distribute your assets to any individuals or institutions you choose and in whichever way you desire. The legislated order of heirs is only relevant if you do not write a will.
You may add stipulations and conditions to the inheritance (as long as they do not require someone to break the law). For instance, your will can specify that a descendant will only receive access to their portion of the estate if they use it towards an academic degree.
You can name both a first and a second heir for any of your assets. In other words, you can decree that when the first heir of an asset passes away (or some other condition is met) the asset then passes on to a particular heir of your choice. The first heir cannot contradict this instruction in their own will. You can not name an unborn person as a first heir, but you may specify them as the second heir of an asset.
The heir-after-heir restriction
The law allows a testator (the person creating a will) to designate a first and second heir, but not any subsequent heirs. (Alternatively, the testator can bequeath the use of the property to the first heir and the ownership of the property to the second heir.) A testator cannot create a longer chain of heirs in their will. For example, a testator cannot decree that their asset will be bequeathed ad infinitum specifically to the firstborn sons of his descendants. The right to name a second heir to an asset is established in the 1965 Israeli Succession Law. The first heir can do whatever they please with the inheritance in the meantime, but they cannot bequeath it to anyone else in their own will.
A testator can bypass the heir-after-heir restriction and create a chain of beneficiaries of the estate by creating a private trust via the will (as explained below).
How to write a last will and testament
There are four ways to create a legally binding will in Israel:
- Personally hand-write the entire will.
- Sign a printed will in the presence of two witnesses who also sign the will.
- Alternatively, sign the printed will in the presence of a judge or a Registrar of Inheritance who also signs the will.
- Under very particular circumstances, a person is permitted to dictate a will verbally (e.g. if they are on their deathbed).
The will must include the date it was signed. In the case of multiple wills, the last will written is the legally binding one.
How to avoid legal mistakes when writing a will
- Make sure you date and sign the will.
- In the text of the will, testify that you wrote and signed it while you were lucid and of sound mind.
- If you do not have two witnesses, make sure to hand-write the will in its entirety. The court will ignore any section not written by your hand.
- Your heirs cannot serve as witnesses to the will nor be present while you write it.
- Include identifying information such as your full name and Israeli personal identification number.
- Likewise, include identifying information for the heirs and the witnesses.
- If the heirs are minors, remember to specify who is responsible for managing the estate until the heirs reach adulthood.
Submitting your will to the Inheritance Registrar
Once you have written your will, you should deposit the will with the Israeli Registrar for the Matters of Succession. It is not obligatory, but by depositing your will with the Inheritance Registrar you can prevent it from being lost, misplaced, or destroyed. It can also help prove the will’s authenticity in the future. You should hire an experienced Israeli probate lawyer to help you navigate the intricacies of inheritance law. The attorney will assist you in the process of creating and depositing a will. An expert on inheritance law in Israel can guarantee that the will meets the legal requirements and that its phrasing does not contain legal ambiguities.
Naming an executor of the estate
The person who manages an estate after its owner’s death is called the executor of the estate (“menahel izavon” in Hebrew). The executor settles all debts and expenses using estate funds. They then distribute the remainder of the inheritance to the heirs per the testator’s instructions. I recommend that you name a specific person as your estate executor. If the will does not name an executor and the heirs cannot agree on who it should be, the courts may appoint one.
Setting up trusts and endowments
A fiduciary trust (“ne’emanut” in Hebrew) is a particular legal relationship by which a trustor (the person who creates the trust) transfers an asset’s legal title to a third party known as the trustee, for the benefit of someone else (the beneficiary). A testator can include a provision in their will that establishes a fiduciary trust with all or part of their estate, once they pass away. Such a provision needs to be written as a “writ of endowment” (“shtar hekdesh”), as regulated by Israel’s Trust Law (1979). A trust established by a will is called a testamentary trust.
Types of testamentary trusts
There are two basic types of testamentary trusts in Israel, namely private endowments and public endowments. A public endowment is a way for the testator to dedicate part of their estate towards charitable activity or the promotion of specific social goals.
Conversely, a private endowment is another means of passing on the benefits of an estate to the chosen beneficiaries. Creating a private endowment has a few advantages over bequeathing an inheritance directly. Testamentary endowments bypass regulations and restrictions in Israeli probate law. One legal restriction that a private endowment can override is the heir-after-heir rule.
Creating a distribution agreement by the heirs of an estate
The inheritors of an estate are permitted to distribute the estate amongst themselves in a way that is different from that prescribed in the will or the order of succession. If the relevant heirs decide to distribute the estate differently, they should write and sign a formal agreement. The probate court will consider this agreement binding and distribute the assets accordingly.
Testators can establish a private endowment in their will if they want to prevent their heirs from distributing the estate differently. A private endowment will benefit the beneficiaries named in the writ of the endowment, but a separate trustee will hold the title to the assets. Trustees are not permitted to distribute the trust’s funds differently than prescribed.
Inheritance law in Israel – responsibilities of the heirs
For heirs to actualize their rights and receive their inheritance, they should check if the departed deposited a will at the Registrar for the Matters of Succession. They must submit an application for either a probate order or an inheritance order from the Inheritance Registrar. The heirs will need to request a probate order if a will exists. If there is no will, neither deposited at the Inheritance Registry nor found elsewhere, then the heirs should request an inheritance order. If the will accounts for only part of the estate, the heirs will need to apply for both types of orders.
When the registrar issues an order they will publicize the request in a daily newspaper and in the registry. They will designate a waiting period of at least two weeks. The courts will sign the order if no one issues objections during the waiting period. The heirs will then be able to access the bank accounts and belongings that they have inherited. In the case of real estate, they will also need to register a bequest of land at the Israeli Land Registry.
Probate orders and inheritance orders
A probate order (“tsav kiyum tsava’ah” in Hebrew) is a declaration by the State of Israel that a testator’s will is valid and has lawfully gone into effect. It legally transfers ownership of the estate from the testator to their heirs per the written will. The order is automatically sent to all the banks in Israel and the relevant government institutions, including the land registrar. Without a probate order, the heirs cannot claim their property.
It is best to submit the request online. An heir can only submit an online request if they have the original will, if the testator had submitted the will to the Inheritance Registrar, or if they are represented by an Israeli probate lawyer. Otherwise, the heirs need to submit a request in person. Requesting a probate order always involves administrative fees. The estate executor will pay the administrative and legal fees out of the estate before distributing the remainder.
Conversely, if a deceased estate owner did not make a will, any potential heir should apply for an inheritance order (“tsav yerushah” in Hebrew). This can be done online. The courts will then divide the property among the close relatives of the deceased. The Israeli inheritance law defines the precise order of heirs in cases of intestacy.
If you need assistance, you can contact our law firm to help you navigate through the legal paperwork.
How to appoint an estate executor
An estate executor is the administrator who manages the protection of the estate, pays fees and outstanding debts out of the estate, and divides the assets among the heirs. The executor may not receive a fee greater than 4% of the monetary worth of the estate.
If the will does not appoint an estate manager or if no will exists, then the heirs can choose one jointly. They can name a temporary manager of the estate as an affidavit before submitting a request for a probate or inheritance order. Alternatively, the heirs can request the appointment of a permanent estate executor by applying for it along with their application for a probate or inheritance order. If the heirs cannot agree on the appointment of an executor, the probate court can appoint one instead.
Debts and expenses
The probate courts deduct all debts and expenses from the estate before distributing it to the heirs (regardless of whether the deceased person made a will). The estate executor will pay any outstanding creditors out of the estate before they divide the remainder among the heirs.
Moreover, the executor will pay for the funerary and burial expenses out of the estate. (The will may include specific instructions regarding the funeral and burial.) The payment of administrative fees also comes out of the estate. If the executor can only cover the debts and expenses by selling real estate assets, the heirs will receive the first opportunity to purchase the assets.
Does inheritance law in Israel impose an estate tax?
In the past, Israel had collected an inheritance tax on bequeathed assets. The Knesset, the Parliament of Israel, abolished that tax in 1981. Currently, Israel does not impose direct taxation on inheritances or gifts (last updated in 2022).
Nonetheless, if the heirs ever sell the inherited property, they must pay a capital gains tax. The State calculates the tax according to the monetary appreciation of the value since the date the deceased owner acquired it (rather than the date the heirs received the estate). This continuity principle in Israeli inheritance law constitutes a hidden and indirect inheritance tax on certain assets. Moreover, private endowments are subject to different taxes than direct inheritance, so you should consult a lawyer before creating a testamentary trust in your will.
Israeli Probate Lawyer
If this article was helpful to you, then you should explore our website for more articles on inheritance law. Contact us if you have any questions or require an attorney specializing in inheritance law in Israel. Our law firm has branches in Jerusalem and Tel Aviv. Call us at 03-3724722 or email [email protected]. We would love to hear from you and offer you our services.