Inheritance and Estate Tax in Israel

Does Israel have an inheritance or estate tax?

No. Israel abolished its estate and inheritance tax (Mas Yerusha) effective 1 April 1981, and no such tax has applied since [pwc-summaries]. The act of inheriting assets from a deceased person -- whether real estate, securities, bank deposits, or business interests -- is not a taxable event under Israeli law. Neither the estate nor the heirs pay any duty on the transfer itself. This has remained the settled legal position for over four decades; as of mid-2026 there is no legislation before the Knesset to reinstate inheritance or estate taxation, though the Israel Tax Authority has periodically acknowledged that the question may be revisited in future budget discussions [chambers-2025].

Israel equally imposes no net wealth tax on residents, so inherited assets held by heirs are not subject to any annual levy on their value [pwc-summaries].

What capital gains tax applies when heirs later sell an inherited asset?

The absence of an inheritance tax does not mean there is no tax exposure at all. When a heir eventually sells an inherited asset, capital gains tax (Mas Shevach for real estate; the general CGT framework under the Income Tax Ordinance for other assets) applies to the entire appreciation from the deceased's original acquisition -- not just growth since the date of inheritance [chambers-2025] [sdtax].

Israel follows a carry-over basis rule (sometimes described as the "step into the shoes" principle under Section 88 of the Income Tax Ordinance). The heir is treated as though they were the original purchaser: they inherit both the deceased's original cost and the deceased's original acquisition date. There is no automatic step-up of the cost base to fair market value at the date of death.

Example. A parent bought an apartment in Jerusalem in 2005 for ILS 1,200,000. The parent dies in 2024 when the apartment is worth ILS 3,800,000. No tax falls on that transfer. The heir inherits the apartment with a carried-over cost base of ILS 1,200,000 and a 2005 acquisition date. When the heir sells in 2026 for ILS 4,000,000, Mas Shevach is calculated on the real (inflation-adjusted) gain running from 2005, not merely from 2024. At the standard 25% rate, the taxable portion of the ILS 2,800,000 nominal gain (adjusted for inflation and the linear pre-2014 relief) can produce a substantially larger bill than the heir might expect.

For real estate, the headline rate is 25% for most individuals (30% for a 10%-or-more shareholder in a real-estate association). For securities and other capital assets acquired on or after 1 January 2003, the same 25%/30% rates apply under the general CGT framework [pwc-summaries].

One important relief: if the deceased owned only one residential apartment and would have qualified for the single-residence exemption from Mas Shevach had they sold it while alive, their heir (being a spouse, descendant, or descendant's spouse) may be able to claim that same exemption on a subsequent sale, provided the heir is an Israeli resident at the time of sale [givatilaw].

How does the Succession Law and probate process work?

Inheritance in Israel is governed by the Succession Law, 5725-1965 [gov-il-inheritance]. When a person dies with a valid will, the executor applies to the Registrar of Inheritance (Rasham HaYerushot) under the Ministry of Justice for a Probate Order (Tzav Kiyum Tzava), which gives the will legal force. When a person dies without a will, heirs apply for a Succession Order (Tzav Yerusha), which formally identifies the legal heirs and their shares under the statutory default rules.

The statutory intestate succession order under the 1965 law is:

1. Spouse and children -- first in line. The surviving spouse receives one-half of the estate if the deceased left children or grandchildren; the remaining half is divided equally among the children (grandchildren inherit their parent's share where that child predeceased).
2. If no spouse survives, children inherit the entire estate equally.
3. If no children or grandchildren survive, the spouse receives two-thirds; the remaining one-third passes to the deceased's parents or siblings.
4. If no spouse and no descendants survive, the estate passes to parents, then siblings and their descendants, then grandparents and their descendants.
5. In the absence of any qualifying relative, the State of Israel inherits.

Most straightforward probate applications are decided within 90 to 150 days, including a mandatory 14-day public-notice period during which objections may be lodged [saliorlaw]. Foreign heirs do not need to be physically present in Israel; they may authorise an Israeli attorney under a notarised Power of Attorney to manage the process. Foreign-language documents must be translated into Hebrew and apostilled.

What are the gift rules in Israel?

Gifts between Israeli residents are generally not subject to income tax or a separate gift tax [pwc-summaries]. Section 97(a)(5) of the Income Tax Ordinance exempts bona fide gifts transferred by an individual to another individual, provided the recipient is an Israeli tax resident. A gift to a non-Israeli resident is treated as a deemed sale for capital gains purposes -- the donor may face CGT on the full appreciation as if they had sold the asset at market value on the date of transfer [sdtax].

Two conditions govern the exemption: the transfer must be a genuine gift (no material return consideration, however small), and the recipient must be resident. When gifted assets are later sold by the recipient, the same carry-over basis rule applies -- the recipient steps into the original donor's shoes for cost and acquisition date, exactly as with inherited assets.

For real estate gifts to family members, the Land Taxation Law provides a reduced purchase tax (Mas Rechisha) at roughly one-third of the standard rate, subject to defined family-relationship criteria [aharonilaw-gifts]. Anti-avoidance rules under Section 86 of the Income Tax Ordinance allow the Israel Tax Authority to disregard transactions that are artificial, fictitious, or structured primarily to achieve an improper reduction of tax. Gifting arrangements that appear designed to launder an asset's appreciated cost base across a chain of family transfers, rather than represent genuine wealth transfers, fall within Section 86 scrutiny.

How do cross-border and foreign-estate situations work?

Israel having no inheritance tax does not protect heirs from foreign estate taxes that may apply to Israeli-resident decedents or non-resident heirs [chambers-2025] [saliorlaw].

• US heirs: The United States imposes its federal estate tax on the worldwide estate of US citizens and US-domiciled residents regardless of where assets are located. US beneficiaries receiving an inheritance from a foreign person valued above USD 100,000 must report it on IRS Form 3520; failure to file carries penalties of 5% of the inheritance per month. There is no comprehensive US-Israel estate tax treaty, so treaty-based relief is limited.
• UK heirs / UK-domiciled decedents: UK Inheritance Tax applies at 40% above the GBP 325,000 nil-rate band on the worldwide estate of UK-domiciled individuals and on UK-situated assets of non-domiciled individuals. An Israeli resident with UK-situs assets (UK property, UK-registered shares) may therefore trigger UK IHT exposure despite Israel's own nil rate.
• Step-up mechanism for inherited foreign property: When an Israeli resident inherits property from a non-Israeli resident (e.g., a foreign parent), the general carry-over rule would in theory impose Israeli CGT on appreciation that accumulated entirely outside Israel. The Israel Tax Authority operates a discretionary procedure -- summarised on Form 905 -- under which a qualifying heir can request that the cost base be reset to the property's fair market value at the date of death. If approved, CGT is limited to appreciation accruing after inheritance. Applications should be submitted promptly after the inheritance is received [y-tax-abroad].

For cross-border estates, especially those spanning the US and Israel, consult Israel country overview for treaty context, and engage a qualified tax professional with dual-jurisdiction experience before making distribution or sale decisions.