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34 The US-Israel Legal Review 2019
ISRAEL: TRUSTS AND ESTATES
lifetime of the settlor, they are removed from his
estate, and therefore the need for an inheritance
or probate order with respect thereof becomes
superfluous, provided the trust is irrevocable and
was set properly.
TAX CONSIDERATIONS
There is no gift tax and estate tax in Israel and should
a person decide to transfer his or her assets by way
of inheritance in accordance with the Succession
law, or by way of will, the transfer is would not be
considered as a tax event, regardless of the nature
of the assets. However, such transfer of assets in
Israel may be regarded as a tax event under US law
in circumstances where the deceased is a US person.
Shouldapersondecidetotransferhisorherassets
by way of creating a trust – an inter vivos trust or a
testamentary trust – than there may be applicable
reporting and tax obligations in accordance with
the law for the taxation of trusts from 2006, which
was later amended in 2014.
32
Although the transfer
of assets to a trustee in a testamentary trust is not
considered a tax event, there may be reporting
and tax obligation imposed upon the trustee and
beneficiaries under the law for the taxation of trusts.
In circumstances where a US person owns assets
in Israel, or an Israeli resident owns assets in the US,
or where a US person or Israeli resident is related
to a trust, reporting and tax obligations may be
applicable both in Israel and in the US.
Furthermore, it should also be noted that Israel
and the US have been parties to a treaty for the
avoidance of double taxation since 1975,
33
and Israel
is a party to many other such treaties,
34
yet these
treaties usually do not regulate estate tax.
CONCLUSION
Inheritance procedure in Israel is complex. In a
situationwhere aUS person owns assets in Israel, or
an Israeli resident owns assets in the US, a separate
procedure must be executed in each jurisdiction.
The creation of a trust may provide a good
alternative, especially if the person wishes that his
or her assets will be managed in accordance with
his or her instructions for a relatively long period
of time after his death. However, tax implications
and possible conflict of laws should be taken into
consideration when deciding the best course of
action. Given the complexity of such situation, it is
highly recommended to consult with professionals,
and a fertile cooperation between US and Israeli
professional is highly important.
n
ABOUT THE AUTHORS
Dr. AlonKaplan
, LLM(Jerusalem), PhD(Zurich), TEP,
practices law in Tel Aviv specializing in Trusts and
Estates. Alon is amember of the Israel Bar Association,
Frankfurt Bar, and the New York bar. He serves as a
member of the international board of the Weizmann
Institute, and a member of the board of the Israel-
Switzerland Chamber of Commerce. Alon is the co-
chairman of the committee on International private
law of the Israel Bar Association. He is the General
Editor of
Trusts in Prime Jurisdictions
(4th edition,
April 2016), the Israel Country Correspondent for
Oxford Journals’
Trusts and Trustees
, author of
Trusts
in Israel: Development and current practice
(2015
Helbing Lichtenhahn Verlag) and
Trusts and Estate
planning in Israel
(Oct. 2016, Juris Publishing).
alon@alonkaplan-law.com
Meytal Liberman
, LLB (Bar-Ilan), LLM (Tel Aviv),
TEP, was admitted to the Israel Bar in 2013. She
advises private clients from Israel and overseas on
trusts and estate planning as an Associate Advocate at
the lawoffice of Herzog Fox &Neeman, after acquiring
expertise in her field of practice as an Associate
Advocate at Dr. Alon Kaplan, Advocate & Notary.
Meytal has been a member of the Society of Trusts
and Estates Practitioners (STEP) since 2015. She
holds a Diploma in International Trust Management
and is the General Editor and contributor of the book
Trust in Israel: Theory and Practice
by Alon Kaplan,
which was published in Hebrew in 2017.
libermanm@hfn.co.il
In a situation where a US person
owns assets in Israel, or an
Israeli resident owns assets in
the US, a separate procedure
must be executed in each
jurisdiction.