How to Transfer Inherited Funds from Israel to Your Foreign Account

Getting inherited money out of an Israeli bank account involves two distinct processes that most families conflate into one. The first is legal: establishing the right to the funds through an inheritance or probate order from an Israeli court. The second is banking: convincing the bank's compliance team, through documentation and patience, that it is permitted to release those funds to a foreign account.

The legal process is covered in detail in our guide to Israeli probate for non-residents. This guide focuses on what comes after the court order — what Israeli banks actually require, where the delays occur, and how to manage the transfer process efficiently from abroad.

Before the Bank Will Do Anything

No Israeli bank will release funds from a deceased person's account, take instructions from heirs, or discuss account balances until one document is presented: either an inheritance order (where there was no will) or a probate order (where there was a valid will). Both are formal court orders issued by the Inheritance Registrar or Family Court under the Succession Law 1965.

This is not negotiable, and it is not a technicality. Banks that release funds without a court order face regulatory consequences under the Banking Ordinance 1941 and the bank's own internal compliance procedures. A family member who arrives at a bank branch with a death certificate, a foreign will, and a foreign grant of probate will be turned away. The Israeli court order must exist before any bank conversation about account access is possible.

Once the order exists, present it — together with the deceased's death certificate, your passport, and the power of attorney authorising your Israeli attorney to act — to the branch where the account is held. The compliance process then begins.

AML Compliance: The Real Bottleneck

This is where most of the delay occurs, and where most families are caught by surprise. Israeli banks are subject to strict anti-money laundering requirements under the Prohibition on Money Laundering Law 5760-2000 and the Bank of Israel's Proper Conduct of Banking Business Directive 411. An inheritance transfer — funds moving from a deceased person's Israeli account to a foreign beneficiary — falls squarely within the transaction categories that trigger enhanced due diligence.

What the bank's compliance team is verifying is not whether the inheritance is legitimate. The court order already establishes that. What they are verifying is the origin of the deceased's wealth and whether the transfer is consistent with what the bank knows about the account's history.

The standard compliance package for an inheritance transfer includes: a source-of-wealth explanation covering how the deceased accumulated the funds (employment history, business records, investment summaries, property sale records); the heir's own identity and background documentation; and, for transfers above NIS 50,000, a beneficial ownership declaration. For larger transfers, the bank may also require a CPA letter or audited financial statement from the estate.

Document this before the bank asks for it, not after. An attorney who presents the compliance package proactively — with a covering letter addressing the likely questions before they are asked — typically reduces the compliance review from 6 to 8 weeks to 2 to 4 weeks. Waiting for the bank to ask for each document sequentially doubles the timeline.

In Practice: Under Section 7 of the Prohibition on Money Laundering (Identification, Reporting and Recordkeeping Duties of Banking Corporations) Order, Israeli banks must file a Currency Transaction Report with the Israel Money Laundering and Terror Financing Prohibition Authority for any international transfer of NIS 1,000,000 or more. For inheritance transfers of this size, the report is filed automatically by the bank within three business days of the transfer — the heir is not notified and the transfer is not blocked. The compliance review that precedes the transfer typically takes 2 to 8 weeks from the date the complete documentation package is presented to the bank. On an estate of NIS 2 million, banking costs include wire transfer fees of NIS 50 to NIS 250 and currency conversion at the bank's spread, typically 1 to 2.5% above the mid-market rate.

Tax Clearance: When It Is Required

Israel has no inheritance tax or estate tax. The transfer of inherited funds from an Israeli account to a foreign beneficiary is not itself a taxable event. The bank does not require tax clearance for a straightforward cash inheritance.

Tax clearance becomes relevant in two situations. First, where real estate was part of the estate and was sold during the administration process — the sale may attract capital gains tax under the Real Estate Taxation Law 1963, and the Tax Authority must confirm that any liability has been settled before the proceeds can be freely transferred. Second, where the deceased had outstanding tax obligations — unpaid income tax, VAT, or National Insurance — the estate is liable for those debts, and the Tax Authority may assert a lien against the estate funds.

Your Israeli attorney can apply for a clearance letter from the Israel Tax Authority confirming there are no outstanding obligations. This process takes 2 to 4 weeks. Where the estate is straightforward — no business interests, no real estate sales — clearance is typically issued without difficulty.

Obtaining clearance before the transfer is much simpler than dealing with a Tax Authority claim after the funds have left Israel.

Executing the Transfer

Once the bank's compliance review is complete and any required tax clearance is in hand, the actual wire transfer is straightforward. The attorney or account holder instructs the bank to transfer the funds to the designated foreign account, providing the recipient bank's SWIFT/BIC code, the account IBAN or account number, the account holder's name exactly as it appears on the foreign account, and the purpose of the transfer.

For large amounts, consider breaking the transfer into two or three tranches over consecutive banking days. Currency exposure on a large NIS balance can be significant, and using a specialist foreign exchange provider — rather than the bank's standard conversion rate — can save 1 to 2% on large sums. On NIS 2 million, the difference between the bank's rate and a specialist's rate is often NIS 20,000 to NIS 40,000.

In Practice: The Israel Tax Authority processes requests for estate tax clearance letters at its district offices, typically within 2 to 4 weeks of a complete submission by the estate's Israeli attorney. The submission must include the inheritance or probate order, a list of the estate's assets and their values, evidence of any asset sales during the administration period, and the estate's tax identification number. Where the estate includes real estate that was sold — triggering capital gains tax under Section 6 of the Real Estate Taxation Law 1963 — the capital gains liability must be fully settled before the clearance letter is issued. Israeli banks treating a transfer request as routine while the Tax Authority has a pending claim against the estate will freeze the transfer when the claim is asserted.

Reporting in Your Home Country

The Israeli side of the transfer involves no reporting obligation on the heir. The home-country side may involve several.

United States. US persons who inherit more than USD 100,000 from a foreign estate must file IRS Form 3520 in the tax year the inheritance is received. This is an informational form — it does not create a US tax liability on the inheritance itself, but failure to file triggers automatic penalties. Separately, if the heir had signature authority over the Israeli account during the estate administration process and the account balance exceeded USD 10,000 at any point, FinCEN 114 (FBAR) may apply.

United Kingdom. The inheritance itself is unlikely to create UK income tax liability. However, if the inherited assets include investments or property that subsequently generate income or capital gains, those need to be reported through the heir's self-assessment.

Canada. Foreign assets — including inherited Israeli bank accounts — with a total cost base above CAD 100,000 must be reported on Form T1135 in the year they are received.

Australia. Australia does not tax foreign inheritances, but subsequent income from inherited assets is assessable Australian income.

These obligations exist independently of anything Israel does or does not require. Consult a tax advisor in your home country before the transfer clears, not after.

Managing the Process from Abroad

The full process — from death to funds in a foreign account — is regularly completed by non-residents who never travel to Israel. The mechanism is the power of attorney: a comprehensive document, executed before a local notary, apostilled in your home country, and translated into Hebrew, that authorises an Israeli attorney to act for you across every stage of the process.

The power of attorney must be specific. It must authorise the attorney to appear before the Inheritance Registrar and Family Court, deal with Israeli banks, sign documents on your behalf, apply for tax clearance, and execute wire transfer instructions. A general power of attorney is insufficient for most of these purposes.

What Often Goes Wrong

Providing incomplete documentation to the bank upfront. The bank's compliance team will not begin its review until it has a complete package. Submitting the court order without the source-of-wealth documentation, or presenting the source-of-wealth explanation without supporting records, restarts the clock each time. Treat the bank submission as a single complete filing — not an iterative exchange.

Assuming no tax issue exists without checking. Families who inherit straightforward cash accounts are usually right that there is no tax issue. Families who inherit estates that included a business, rental property, or investments should not assume this. The cost of a brief inquiry to the Tax Authority is trivial compared to the cost of a tax lien asserted against transferred funds that the Tax Authority is then entitled to pursue internationally.

Common Mistake: Heirs who instruct the Israeli bank to transfer inherited funds without first obtaining tax clearance from the Israel Tax Authority create a recoverable but expensive problem. The Tax Authority is entitled to assert a claim against estate assets regardless of where those assets have been transferred. If the funds have already reached a foreign account and a tax liability subsequently surfaces, recovering the situation requires re-engaging with both the Israeli Tax Authority and the foreign jurisdiction — a process that typically involves NIS 10,000 to NIS 25,000 in additional legal and accounting fees and delays of 3 to 6 months.

Practical Checklist

• Obtain the original certified inheritance or probate order from the Inheritance Registrar or Family Court before approaching any bank
• Prepare a complete bank compliance package upfront: court order, death certificate, heir identity documents, source-of-wealth explanation, and beneficial ownership declaration
• Apply for tax clearance from the Israel Tax Authority before initiating the transfer — even if you believe no tax liability exists
• Confirm the power of attorney specifically authorises your Israeli attorney to give wire transfer instructions to the bank
• Obtain the recipient bank's SWIFT/BIC code, IBAN, and account holder name exactly as the bank requires them — errors in wire transfer details delay the transfer by 2 to 5 business days
• For amounts above NIS 500,000, compare the bank's currency conversion rate against a specialist foreign exchange provider before instructing the bank
• Check your home country's reporting obligations for foreign inheritances before the transfer clears

Speak With an Israeli Attorney

The transfer process is manageable once the probate order exists and the compliance documentation is correctly assembled. Where families run into trouble is in underestimating what the bank's compliance team requires and in discovering tax issues mid-transfer. Adv. Eli Shimony advises non-resident heirs on the full transfer process — from probate order through to funds arriving in the foreign account.

Contact us for a confidential initial consultation.