Inheritance Tax in Israel

This is one of the most common questions around inheritance, and one of the most confusing. So let us start with the direct answer: there is no inheritance tax in Israel. That does not mean no tax is ever connected to an inheritance. Here is the clear version.

Disclosure: Educational information only. This is not tax or legal advice. Inheritance and taxation law is complex — verify with a lawyer or tax adviser. Any action you take is your own responsibility.

Is there inheritance tax in Israel?

No. Estate tax, or inheritance tax, was abolished in Israel back in 1981. Anyone inheriting money, an apartment or another asset pays no tax simply for receiving the inheritance.

This differs sharply from many countries where inheritance tax is substantial, which is part of why the confusion persists.

So when is tax paid in connection with an inheritance?

Here is the important point: although there is no tax on receiving an inheritance, tax may apply later, when you realise the asset you inherited:

Betterment tax on selling an inherited apartment. If you inherited an apartment and later sold it, you may be liable for betterment tax on the gain — although exemptions and reliefs exist for heirs in certain circumstances, for instance where the apartment was the deceased's only residence.

Tax on future income from the asset. If the inherited asset produces income, whether rent or dividends, that future income is taxed as normal. See the taxes section.

Planning and intergenerational transfer

In the absence of inheritance tax, the central planning question is usually how assets are transferred — by inheritance, as a lifetime gift, or through a trust — and what the future implications are, primarily future betterment tax and rights in an apartment.

This is where a real estate or inheritance lawyer can prevent expensive mistakes. It is also worth understanding the importance of a will in regulating the division of the estate.

Common mistakes

1. Assuming tax is owed on an inheritance. In Israel it is not.

2. Forgetting betterment tax when selling an inherited apartment.

3. Not planning intergenerational transfer in advance.

Summary

The good news: there is no inheritance tax in Israel. The important news: realising an inherited asset, primarily selling an apartment, may attract betterment tax. It is worth planning ahead and taking advice. See betterment tax and the taxes section. We provide the knowledge — the decisions remain yours.