Inheriting Property in Israel – a Canadian’s guide
When a Canadian inherits property in Israel, things can get confusing – unless you know the basics. This article breaks down and explains the Israeli inheritance issues as they affect Canadians and describes in simple terms some of the differences between Canadian and Israeli inheritance law.
Registrar of Inheritances
In all cases where a Canadian inherits personal property (such as money, shares, etc. ) or real property (such as land, apartment, etc.) that is located in Israel, in order to receive the property in the estate, it is necessary to apply to the Registrar of Inheritances. There are several Registrars in Israel and each has jurisdiction in a specific region of the country.
Probate or Intestacy
Where the Deceased has left a Will, an application for a Probate Order has to be made. In the case where there is an intestacy (i.e., no will was left), an application for an Order of Inheritance must be made.
If there is a “foreign element” involved then the Registrar of Inheritances will transfer the case to the local Israeli Family Court who then takes jurisdiction. Examples of “foreign element” situations would include:
- Situations where the Deceased was a foreigner
- Situations where the Deceased was an Israeli resident and left property in a foreign jurisdiction
- Any other situation where there is some foreign element involved
In such a case, in addition to the other documents which must be submitted to the Court, the Applicant is required to submit to the Court a legal opinion as to the legality of the “foreign element”. Such an opinion can only be prepared by an expert on Canadian law and preferably someone who lives in Israel as the other party has the right to cross-examine the expert on his opinion. An example where this would be required is where the Deceased lived in Canada and bequeathed land in Israel to someone. It would not matter whether the beneficiary is an Israeli resident or not because in this case the Deceased constitutes the “foreign element”.
How Long Should the Process Take?
If the matter is not contested, it should take from 2-4 months from the date all the documents are submitted to the Registrar of Inheritances to obtain the Order of Probate or alternatively the Order of Inheritance. If the file is transferred to the Family Court, the matter depends on the schedule of the particular Family Court which has jurisdiction. If the matter is contested, it is impossible to predict how and when the matter will be finally resolved.
Differences Between Canadian and Israeli Inheritance Law
Israel and Canada deal differently with regard to the appointment of an Executor. In Canada, it is extremely rare that an Executor is not appointed by the Court. In cases where the Will provides for the appointment of an Executor, there is absolutely no issue. In cases where there is an intestacy, the Court will also appoint an Executor.
This is NOT the norm in Israel. Most Registrars/ Judges are reluctant, in “simple” cases, to appoint an Executor even if the Will provides for such an appointment! The reason for this is that in “simple” cases, the Judge is often of the opinion that the beneficiaries can deal with the distribution of the estate on their own without the need for an Executor who will, at the end of the performance of his duties, be entitled to a fee ranging from 3-6% of the value of the estate. Many Judges would prefer that the heirs receive this money rather than the Executor.
Such a situation presents a problem in certain cases. One example of this is when the beneficiary is in Canada and is not able to deal with the matter on his own. In such a case (and again this situation may arise in many circumstances), one has to apply to the Court and give persuasive reasons why an Executor should be appointed.
Taxation at Death
Another area where there is a major difference is in the field of taxation at death. In Canada, lawyers and accountants have developed very sophisticated methods of avoiding or delaying the payment of capital gains taxes, probate taxes, etc. Estate plans such as “estate freezing”, spousal rollovers, different elections under the law, and many other methods are used.
Israel, on the other hand, is a great place to die if you are the Deceased’s beneficiary since there are no estate or death taxes or deemed dispositions, etc. The beneficiary receives his or her share in the estate, tax-free! However, if you sell an asset you inherited you may be subject to tax in Israel depending on what you decide to do with it. The nature of the tax is dependent on the nature of the asset. For instance, if you inherited 1 million shekels, you would receive that tax free. However, if you invested the 1 million shekels, you would pay income tax on the interest earned. With respect to an apartment which is inherited, the situation is more complex as there are numerous factors which come into play and are beyond the scope of this article. If you fall into this category, you should consult a lawyer with experience in this area.