How a US Heir Moved NIS 1.05M of a Haifa Estate to Her Own Children

Result: NIS 1,053,000 of a Haifa estate reached the heir's two children instead of her siblings · Timeline: 7 months from death to registered gift · Challenge: Israeli renunciation cannot benefit grandchildren · Authority: Inheritance Registrar, Haifa district · Financial Impact: NIS 1,053,000 preserved, purchase tax of NIS 25,300 instead of NIS 76,000

Background

Our client was a 61-year-old retired teacher living outside Baltimore. Her father, an Israeli resident, died in Haifa in October 2025 without leaving a will, and his estate consisted of a three-room apartment in Neve Sha'anan worth roughly NIS 2,850,000 and NIS 310,000 sitting in his Israeli bank account. Under the intestacy rules he left three children: two of them in Israel, and our client in Maryland. She did not need the money. Her husband had recently come through surgery, she could not travel, and what she wanted was simple in her own mind: her third should go straight to her two adult children in the United States.

Her US estate attorney had already drafted the instrument he uses for exactly this situation, a qualified disclaimer under Section 2518 of the Internal Revenue Code, and was working backwards from the nine-month deadline that runs from the date of death. He asked us to file it with the Israeli authorities. We asked him to hold it, because filing it would have cost his client the entire NIS 1,053,000.

The Challenge

American practitioners reach for the disclaimer because in most US states the disclaimed share drops down through the disclaiming heir's own branch of the family. Israel does not work that way. Renunciation is governed by Section 6 of the Succession Law 1965, and it comes in two forms that behave very differently.

Section 6(a) lets an heir renounce a share, in whole or in part, by written notice to the Inheritance Registrar (Rasham HaYerushot) or to the court, at any time after death and for as long as the estate has not been distributed. There is no Israeli deadline and no filing fee for the notice itself. Section 6(b) then does two things. It treats the renouncing heir as though he had never been an heir at all, and it restricts a directed renunciation to three people only: the spouse, a child, or a sibling of the deceased. Grandchildren are not on that list. A notice reading "I renounce in favour of my son and my daughter" is not a valid directed renunciation, because the intended recipients are the deceased's grandchildren rather than his children.

That leaves a general renunciation, and this is where the American assumption breaks. On a general renunciation the Registrar's practice, following the plain words of Section 6(b), is that the renounced share is added to the shares of the remaining heirs. It does not pass down to the renouncer's own descendants. Our client's third would have been split between her brother in Ramat Gan and her sister in Modi'in. Some Israeli academic writing argues for a different outcome in particular family configurations, but no heir living 9,000 kilometres away should plan around an argument that has to be run after the fact. Renunciation is also irrevocable from the moment the affidavit is filed. There is no correcting it in month two.

In Practice: Under Section 6(b) of the Succession Law 1965 a directed renunciation is valid only in favour of the spouse, a child, or a sibling of the deceased, and a general renunciation adds the share to the other heirs. On this NIS 3,160,000 estate, filing the drafted disclaimer with the Inheritance Registrar in Haifa would have transferred NIS 1,053,000 to two siblings in Israel, irreversibly, within the 50 days the Registrar takes to issue an order once the file is complete.

There was a second problem hiding behind the first. Section 2518 requires that the disclaimed interest pass "without any direction on the part of the person making the disclaimer." Had we tried to bolt an Israeli directed renunciation onto the US instrument, it would have failed the federal test and been treated as a gift by her anyway. The nine-month clock her attorney was racing turned out to be the least of the issues.

What We Did

We started by fixing the Israeli baseline rather than the American one. Israel abolished estate duty in 1981, and Section 4 of the Real Estate Taxation Law 1963 states that inheritance is not a sale, so the devolution of the apartment to the three children carried no purchase tax and no betterment levy. Taking the inheritance in her own name cost her nothing in Israel. That single fact reframed the whole problem: the question was never how to avoid inheriting, only how to move the value on afterwards at the lowest cost.

The sequence we ran was as follows.

1. Succession order. We filed the application for a succession order (tzav yerusha) with the Inheritance Registrar in Haifa in November 2025, online, at the 2026 fee of NIS 507 plus NIS 66 for the statutory newspaper publication. Our client signed nothing in Israel. Her heir affidavit was sworn before a notary in Maryland, apostilled by the Maryland Secretary of State, and translated by an Israeli notary. Her power of attorney travelled the same route. Both were in our hands within three weeks of instruction.
2. The other heirs. Her brother and sister were served with the application through the Registrar in the ordinary way and lodged no objection. The order issued in February 2026, naming the three children in equal thirds. Nothing about it was unusual, which was the point.
3. The gift. Once the order was in hand we prepared a deed of gift transferring her undivided one-third of the apartment to her two children in equal shares, and a straightforward bank transfer of her third of the account balance. Israel has no gift tax on money, so the NIS 103,000 of cash moved without any Israeli filing.
4. The tax filings. The gift of the apartment share was declared to the Israel Tax Authority Real Estate Taxation Office in Haifa within the 30-day self-assessment window. We claimed the Section 62(a) exemption from betterment tax for a transfer without consideration to a relative, and Regulation 20 of the Purchase Tax Regulations 1974 for the children, which sets purchase tax on a gift to a relative at one third of the ordinary rate.
5. Registration. The Land Registry (Tabu) in Haifa registered the succession order and then the gift, and her children now appear on the nesach tabu as owners of one third between them.

We also looked hard at Section 7(a) of the Succession Law, which allows an heir to transfer her share in the estate by written agreement to anybody at all, without the Section 6(b) restriction on who may benefit. It is a real alternative and it does reach grandchildren. We did not use it here. A Section 7 transfer is still a transfer by her for Israeli tax purposes, so it produces the same purchase tax and the same betterment analysis, and the Land Registry still wants the succession order first. The two-step route left a cleaner chain of title for children who will one day sell the flat from abroad.

In Practice: A foreign-resident buyer pays purchase tax at 8% from the first shekel up to NIS 6,055,070 under the Real Estate Taxation Law 1963, so the gifted one-third at NIS 950,000 would ordinarily have carried NIS 76,000. Regulation 20 of the Purchase Tax Regulations 1974 reduced it to NIS 25,333 across the two children, assessed by the Haifa Real Estate Taxation Office and paid within 60 days of the declaration.

On the American side her attorney filed Form 709 to report the gift, which used part of her federal lifetime exemption and produced no cash tax. She also filed Form 3520 to report receipt of a bequest from a foreign estate above the USD 100,000 threshold, a form that is easy to miss and carries penalties that are not.

The Outcome

The whole of her one-third, NIS 1,053,000 in value, ended up where she wanted it. Her children hold a registered one-third of the Haifa apartment and received her share of the cash. Israeli tax on the entire exercise came to NIS 25,333 of purchase tax plus NIS 573 in Registrar fees, against the NIS 76,000 the same transfer would have cost at the standard non-resident rate. Seven months elapsed between her father's death and the registered gift, of which roughly three were spent waiting on the Registrar and the Land Registry rather than on anything we or she controlled.

The number that mattered more was the one that never moved. Had the disclaimer been filed as drafted, NIS 1,053,000 would have gone to her brother and sister, with no route back short of their voluntary agreement. Her siblings were on perfectly good terms with her, but goodwill is not a legal mechanism, and a reverse transfer from them would have been a fresh gift with fresh Israeli tax and a fresh set of American filings.

One practical consequence is worth flagging for her children. Because they took the apartment share by gift rather than by purchase, a future sale is affected by the four-year cooling-off period that applies to a gifted residential apartment before the donee can use the single-apartment exemption, and they inherit their grandfather's original acquisition date for the betterment computation. We set that out for them in writing at the time, so that nobody is surprised in a decade.

If you are working through the same question, our guide to intestate succession in Israel for foreign heirs explains how the statutory shares are fixed before any of this planning begins.

Key Takeaways

What this case illustrates for non-residents in similar situations:

1. An Israeli renunciation is not a US disclaimer. Section 6(b) of the Succession Law 1965 permits a directed renunciation only in favour of the deceased's spouse, child, or sibling, and a general renunciation adds the share to the other heirs rather than dropping it to your own children.
2. Check the destination before you file, because the notice is irrevocable. The affidavit takes effect on filing with the Inheritance Registrar, and there is no cooling-off period, no correction, and no appeal on the ground that you misunderstood where the money would go.
3. Inheriting first is usually cheap in Israel. There is no estate duty, and Section 4 of the Real Estate Taxation Law 1963 keeps the devolution outside purchase tax and betterment, so accepting the inheritance and then moving the value is normally the better structure.
4. Section 62(a) and Regulation 20 do the work a disclaimer cannot. A gift of Israeli real estate to a child is exempt from betterment tax and carries purchase tax at one third of the ordinary rate, even where the child is a foreign resident paying the 8% non-resident band.
5. Run the two legal systems together, not in sequence. A disclaimer drafted to satisfy Section 2518 of the Internal Revenue Code can be worthless or actively harmful once Israeli succession law is applied to the same facts, and the only way to see it is to ask an Israeli lawyer before the US instrument is signed.

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Facing a Similar Situation?

If you have been told to sign a disclaimer, renunciation, or family settlement covering Israeli assets, have someone check where the property actually lands under Israeli law before anything is filed. That check takes days. Undoing a filed renunciation is not possible at all.

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