UK Heir Recovers Dormant Israeli Bank Account After 8 Years

Background

A British woman in her mid-50s contacted our office after discovering, while sorting through her late mother's papers, a 12-year-old Bank Hapoalim savings booklet. Her mother — born in Israel and naturalised British — had left the account untouched after retiring to the UK in 2015. She passed away in late 2024.

The account had never been formally closed. By the time her daughter began researching it, the balance had grown to NIS 185,000 through accumulated interest. But the account had been flagged as dormant for more than seven years and the funds transferred to the State Comptroller's Unclaimed Assets Unit (Yehidat HaNechasim HaPakudim).

The daughter held British probate but had never obtained an Israeli succession order. She had no existing Israeli legal representation and no familiarity with Israeli banking procedures.

The Challenge

Israel's Unclaimed Assets Law 2016 places accounts dormant for seven or more consecutive years under the management of the State Comptroller. The original bank retains a record, but the actual funds are held by the state. Recovering them requires two parallel processes: first, establishing the heir's legal title through an Israeli succession order (tzav yerusha), and second, filing a formal claim with the Unclaimed Assets Unit itself.

There was also a CRS complication. Under Israel's participation in the Common Reporting Standard, Bank Hapoalim had already reported the account to HMRC as an Israeli financial account connected to a UK-resident account holder via the deceased's estate. The daughter needed to reconcile this with her UK tax position — specifically, to confirm she was handling the inherited asset correctly under HMRC rules for foreign estates.

Separately, the accrued interest had never been subject to Israeli withholding tax while the account sat dormant. When released, the interest element would be subject to 25% withholding by the bank before the funds could be transferred abroad.

In Practice: Under Section 6 of the Unclaimed Assets Law 2016, a bank account dormant for 7 or more years is administratively transferred to the State Comptroller's Unclaimed Assets Unit. The heir must file a claim with both the original bank branch and the Unit simultaneously, producing a certified Israeli succession order, certified copies of the deceased's Israeli identity documents, and proof of the claimant's identity. The Unit processes complete claims within 4–8 weeks of receipt. On a NIS 185,000 account, the administrative handling fee deducted before release is typically NIS 2,500–4,000.

There was also the question of which court had jurisdiction for the succession order. The mother had been a dual citizen with no Israeli property and no Israeli will. Her Israeli assets consisted solely of the dormant bank account. An Israeli Family Court succession order was still required under Section 66 of the Succession Law 1965 — a British Grant of Probate alone was insufficient to compel an Israeli institution to release funds.

What We Did

The first step was filing for an Israeli succession order at the Tel Aviv Family Court. Because the mother had died intestate and the daughter was her only heir, the application was relatively straightforward — but it required an apostilled copy of the UK death certificate, a certified Hebrew translation, and a sworn declaration from the heir.

We filed the succession order application and simultaneously located the original Bank Hapoalim branch responsible for the account. The bank's compliance team confirmed the account had been reported to the Unclaimed Assets Unit in 2022.

Once the succession order was granted — approximately nine weeks after filing — we submitted a formal claim to the State Comptroller's Unclaimed Assets Unit in Jerusalem. The claim bundle included the succession order, the UK Grant of Probate (apostilled), and certified identification documents for both the deceased and the heir.

The bank's tax department calculated the withholding on accrued interest: NIS 28,800 in interest over the dormancy period, subject to 25% withholding, producing a NIS 7,200 tax deduction. A withholding certificate was issued to enable the daughter to claim a foreign tax credit against her UK tax liability if applicable.

For the international wire transfer, the bank's compliance department required a full funds-source documentation package before approving the outgoing transfer. We coordinated directly with Bank Hapoalim's AML team to ensure no delays at the transfer stage.

The Outcome

The NIS 185,000 balance (NIS 156,200 principal plus NIS 28,800 in accrued interest) was released from the Unclaimed Assets Unit. After the NIS 7,200 withholding tax on interest and a NIS 3,100 handling fee, the net amount of NIS 174,700 (approximately £39,000 at current rates) was wired to the daughter's UK account.

Total time from first instruction to received funds: 19 weeks. The UK-Israel CRS reporting was reconciled with HMRC: the inherited principal is not UK income, and the Israeli withholding certificate was used to substantiate a foreign tax credit claim.

Key Takeaways

What this case illustrates for UK heirs dealing with Israeli bank accounts:

1. A British Grant of Probate does not substitute for an Israeli succession order — even for a bank account where there is no Israeli property involved. The Israeli institution requires the Israeli court order.
2. Dormant for 7 or more years means the funds are with the State Comptroller, not with the original bank. Always check the Unclaimed Assets register alongside the bank itself; the recovery process is longer but the funds are fully retrievable.
3. Budget for Israeli withholding tax on accrued interest — 25% is deducted at source before any transfer. A UK foreign tax credit claim may partially offset this, but it affects short-term cash flow planning.

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Facing a Similar Situation?

If you have discovered an Israeli bank account belonging to a deceased relative — whether dormant or currently active — we can assist from the first succession order application through to the final wire transfer.

Contact us for a confidential consultation about your Israeli legal matter.