Thinking about death or the possibility that we may one day be unable to manage our own affairs is uncomfortable. Most people postpone dealing with these matters until circumstances force their hand. Yet proper planning is not morbid. On the contrary, it is an act of care - one that protects our children, preserves family harmony, and prevents disputes that could otherwise linger for generations.
This is particularly important for English-speaking residents of Israel who have assets or close family members abroad. Cross-border families often face legal and tax complications that are unique and require proper solutions. If dealt with correctly, they are avoidable - but only with timely and informed advice.
Inheritance Tax Abroad and Real Estate Tax in Israel
Israel does not impose inheritance tax. Many other jurisdictions do. Several European countries, the United Kingdom, and numerous U.S. states levy substantial inheritance or estate taxes.
At the same time, Israel imposes taxes on the sale of real estate which become payable when property is sold.
As an example, consider the following scenario: an heir who resides in Europe inherits an apartment in Israel. The heir may be required to pay inheritance tax in his or her country of residence based on the value of the Israeli property. If the heir then sells the apartment, Israeli real estate taxes will apply. In many cases, the Israeli tax cannot be offset against the inheritance tax paid abroad. The result can be a significant and unexpected tax burden.
Proper estate planning can mitigate these consequences. After death, however, options are extremely limited to non-existent.
Forced Heirship in Europe
Israeli, British, and most American laws generally allow a person to leave his or her estate to whomever they choose. In contrast, many Continental European jurisdictions apply "forced heirship" rules requiring a minimum portion of the estate be reserved for the closest family members - spouse and children.
While the principle sounds straightforward, calculating the protected share can be complex, especially when assets and heirs are located in multiple countries. Disagreements between siblings or between a surviving spouse and children are common and can severely damage family relationships and finances.
Without careful planning taking all relevant legal systems into account, a will drafted in Israel may not achieve the intended result abroad.
Avoiding Court-Appointed Guardianship
As we age, many of us may need assistance from time to time, while still remaining largely independent. Understandably, people are reluctant to grant broad powers of attorney to others during this stage. However, once a person is no longer legally competent, it is too late to sign one. The only option may then be court-appointed guardianship - a restrictive and often distressing process.
Israeli law offers a convenient alternative: the enduring power of attorney. This document is signed when a person is in good health, but takes effect only if and when a person becomes mentally incapable of managing his or her affairs. It allows detailed, binding instructions regarding financial management, medical treatment, living arrangements, and other personal matters.
Through an enduring power of attorney, individuals retain control over their future and ensure that their wishes will be respected - even when they can no longer express them.
Timely legal planning is not about anticipating the worst. It is about protecting dignity, reducing uncertainty, and safeguarding those we care about most.
The author is an Attorney, Partner and Head of Wills and Inheritances Department at Dr. Katy Elmaliah & Co.
Partnered with Dr. Katy Elmaliah & Co. Law Firm
