Why Foreign Nationals Who Own Real Estate in Israel Should Have an Israeli Will

Foreign nationals who invest in Israeli real estate tend to assume that inheritance laws will apply in much the same way as they do in their country of residence. In practice, Israeli law may differ substantially and can sometimes produce unexpected results with significant consequences.

A Real Case (Names and Details Have Been Changed)

David and Rachel, a Jewish couple from Manhattan, purchased a three bedroom apartment in Tel Aviv about ten years ago. They assumed that, as in New York, if one of them passed away, ownership of the apartment would automatically transfer to the surviving spouse.

When Rachel died suddenly, David found himself facing not only a personal loss but a legal shock as well. Under Israeli inheritance law, and in the absence of a will, he became the owner of only 75% of the apartment. This figure reflected his original share in the property combined with his share of the estate under the law of intestacy.

Their son, who had been estranged from the family for years, automatically inherited the remaining 25%. He quickly filed a claim for partition and forced sale of the apartment. The court granted the request. At the age of 72, David found himself losing control of the property he and his wife had purchased together. All of this resulted solely from the absence of an Israeli will.

The Legal Gap That Can Lead to Disputes

Many investors are unaware that Israeli inheritance law can differ substantially from the rules that apply in other countries, including the United States. While jointly held assets may pass automatically to a surviving spouse in some jurisdictions, Israeli law may lead to a very different outcome.

Under the Israeli Succession Law, when a married person with children dies intestate, the surviving spouse generally inherits one half of the estate, while the children inherit the other half.

In practice, this arrangement can create joint ownership between the surviving spouse and the children, a forced partnership that may give rise to significant legal and practical disputes.

A Scenario No Family Wants to Face

Imagine a person in their early seventies, living in New York, who loses their spouse and decides to move temporarily into an apartment they own in Jerusalem, valued at approximately one million dollars.

Shortly thereafter, it becomes clear that they are not the sole owner of the apartment. Their children who may have financial pressures of their own, or a complicated relationship with the surviving parent have become co owners of the property.

In certain circumstances, any co owner may file a claim for partition of the property, including a forced sale. This can leave the surviving spouse dependent on the cooperation of the other co owners, and family disputes can escalate into lengthy and costly legal proceedings.

How an Israeli Will Protects You

Drafting an Israeli will enables advance planning and full control over how assets are distributed. Among other things, it allows you to:

• Full control over the distribution of the estate determining who inherits, the scope of their entitlements, and the timing of the transfer.

• Protection for the surviving spouse ensuring that the spouse receives full rights to the property, while preserving the children’s interests for the future, including through a “successor beneficiary” mechanism.

• Avoiding unnecessary dependency preventing situations in which the surviving spouse is dependent on the cooperation of other heirs in order to remain in their home or retain their assets.

• Protection for vulnerable family members tailoring the will’s provisions to specific needs, including minor children, family members with disabilities, or situations requiring special arrangements such as trusts.

• Reducing future costs proper planning can minimize disputes and save substantial legal expenses.

A properly drafted will is a central tool for preventing situations such as these.

Additional Considerations for Foreign Nationals

Foreign nationals holding assets in Israel should consider in advance:

• The differences between Israeli tax law and the law applicable in their country of residence.

• Whether to incorporate the Israeli property into an existing foreign will or an existing trust structure.

While a tax treaty between Israel and the United States exists for the prevention of double taxation and the recognition of taxes paid in the other country, Israel does not currently impose an inheritance tax. Nevertheless, careful planning of asset distribution remains of great importance.

Common and Costly Mistakes

• “My children would never act that way” In practice, inheritance disputes arise even in families that appeared close knit and harmonious, and that never anticipated such conflict. Financial pressures, outside influences, or misunderstandings can all lead to litigation.

• “I still have time”Estate planning is frequently deferred, but unexpected events can occur at any moment. Without a will, assets will be distributed according to law not necessarily according to the testator’s wishes.

What Is the Next Step?

For foreign nationals holding real estate in Israel, drafting an Israeli will is a recommended step that should not be delayed. Early planning is essential.

A will is not merely a legal document it is a means of protecting your family, preserving assets that were built over a lifetime, and ensuring that your wishes are carried out precisely. It is also an effective tool for preventing disputes among heirs.

The situation described above could have been prevented with proper planning. Taking thoughtful action today can help secure your family’s future.

Disclaimer

The information presented in this article is general in nature and does not constitute legal advice, nor does it create an attorney client relationship. For advice tailored to your personal circumstances, we recommend consulting a lawyer specializing in Israeli inheritance law, and where necessary, coordinating with legal counsel in your country of residence.