Can Australian heirs inherit and withdraw an Israeli keren hishtalmut (study fund)?

Sorting through a late parent's Israeli paperwork, an Australian family finds statements for something called a keren hishtalmut and has no idea what it is or whether they can touch it. It is a distinctly Israeli savings vehicle with no clean Australian equivalent, and how it passes on death depends on a single detail that many families overlook: whether the holder ever named a beneficiary.

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Detailed Explanation

A keren hishtalmut, often translated as a study or advanced-training fund, is a tax-advantaged Israeli savings account held with a provident fund manager (kupat gemel). For inheritance purposes it behaves like other provident-style funds, and that is where the beneficiary point becomes decisive. Under Section 147 of the Succession Law 1965, sums payable on a person's death from a provident fund, pension, or insurance policy that names a beneficiary do not form part of the estate at all. They pass directly to the named beneficiary, outside the will and outside any succession order.

So the first thing to establish is whether the deceased completed a beneficiary designation with the fund. If they did, the named person, often a spouse or child, claims the balance directly from the fund manager by proving their identity and the death, without waiting for probate. If no beneficiary was named, or the named beneficiary has also died, the fund falls into the estate and is released to the heirs only against an Israeli succession order (tzav yerusha) or will execution order. That is the same order that governs the deceased's other Israeli assets, and it is issued by the Inheritance Registrar under the Succession Law.

For heirs in Australia, the mechanics are the familiar cross-border ones. The fund manager will want apostilled proof of identity for each claimant, authenticated through the Department of Foreign Affairs and Trade, and Hebrew translations of any foreign documents, alongside either the beneficiary evidence or the Israeli order. Because the claimants and the fund never meet, this is normally handled by an Israeli lawyer acting under a power of attorney, the same route we describe for transferring inherited funds from Israel and in our answer on whether a non-resident can inherit an Israeli pension fund.

Two tax layers sit at the end. On withdrawal, the fund may deduct Israeli tax at source depending on the fund's history and the amount, and moving the money out of Israel requires a clearance so the bank will execute the wire abroad. On the Australian side, there is no inheritance or estate tax, so receiving the capital is not itself taxed, but any growth or income arising after the date of death can be assessable, and the holding may need to be disclosed as a foreign asset. Coordinating the Israeli withdrawal tax with the Australian position is what keeps the same money from being taxed twice.

In Practice: Under Section 147 of the Succession Law 1965, a keren hishtalmut with a named beneficiary passes outside the estate directly to that beneficiary through the fund manager (kupat gemel); with no beneficiary it is released only against an Israeli succession order from the Inheritance Registrar (Rasham HaYerushot), which for an uncontested foreign-heir file typically issues in 6 to 14 weeks. Transferring the balance to Australia requires Israeli tax clearance before the bank executes the wire, and legal fees for a foreign-heir claim commonly run NIS 8,000 to 20,000.

Key Considerations

• A keren hishtalmut passes outside the estate under Section 147 if the holder named a beneficiary.
• With no beneficiary, it is released to the heirs only against an Israeli succession order.
• The fund manager requires apostilled identity documents and Hebrew translations from Australian heirs.
• Withdrawal may carry Israeli tax at source, and moving funds abroad needs tax clearance.
• Australia has no inheritance tax, but post-death growth can be assessable and the asset may need disclosure.

When to Consult a Lawyer

This question typically requires professional legal advice when:

• You cannot tell whether the deceased named a beneficiary on the fund.
• The fund is part of an estate that needs a succession order before anything is released.
• You need the Israeli withdrawal tax and the Australian reporting coordinated on the transfer.

A qualified Israeli attorney can establish the beneficiary position, obtain any order required, and release and repatriate the fund under a power of attorney.

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Speak With an Israeli Attorney

We recover Israeli provident and study funds for heirs abroad, establishing whether a beneficiary was named, obtaining the succession order where needed, and clearing the tax so the balance reaches your Australian account.

Contact us for a confidential initial consultation.