How do UK heirs release funds from an inherited Israeli bank account?

An Israeli bank will not release funds from a deceased account holder's account to UK heirs simply on the strength of a death certificate and a statement of entitlement. The bank needs an Israeli court order establishing who the legal heirs are, a compliance check on every heir receiving funds, and confirmation from the Israel Tax Authority — or a valid withholding certificate — before releasing a significant sum abroad. Getting all three in the right sequence is where non-resident heirs most often lose weeks of time and incur unnecessary costs.

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Detailed Explanation

Step 1: Obtain the Israeli court order. The foundational document is either a succession order (צו ירושה / tzav yerusha) for an intestate estate, or a will execution order (צו קיום צוואה / tzav kiyum tzavaa) where the deceased left a valid Israeli will. These orders are issued by the Israeli Family Court on the application of any heir or interested party. A UK heir can initiate the application through an Israeli attorney acting under a notarised, apostilled power of attorney — physical presence in Israel is not required. In uncontested cases at Tel Aviv and Central District Family Courts, a succession order takes approximately 3–5 months from filing. Contested matters take materially longer.

Step 2: Present the order to the bank. Once the order is obtained, your Israeli attorney presents the original order, together with certified copies of each heir's passport, to the bank's succession unit. Most major Israeli banks — Bank Leumi, Bank Hapoalim, Bank Mizrahi-Tefahot, Discount Bank — have a dedicated succession and inheritance department (machleket yerushot) that handles these applications. The bank verifies the order against the court record, opens a process, assigns a reference number, and begins its internal compliance review.

Step 3: AML compliance and identity verification. Under the Anti-Money Laundering Law 2000 and Bank of Israel Directive No. 411, the bank must conduct enhanced due diligence on new beneficiaries receiving large transfers. UK heirs with no prior relationship with the Israeli bank will be asked to complete: a Know Your Customer (KYC) questionnaire, a CRS (Common Reporting Standard) self-certification form confirming UK tax residency, confirmation of the UK bank account details for the wire, and copies of the UK heirs' proof of address (utility bill or UK bank statement). This triggers automatic CRS information exchange between the Israeli bank and HMRC.

Step 4: Tax clearance from the Israel Tax Authority. This is the most complex step for larger estates. Israeli banks are required by Israel Tax Authority Circular 5/2002 to withhold 25% of any payment to a non-resident heir from an estate unless one of the following applies:

• The Israel Tax Authority issues a specific withholding exemption or reduced-rate certificate (ishur nikui); or
• The payment is from funds already taxed at the correct rate (for example, regular savings), evidenced by bank records; or
• The estate's total Israeli asset value is below NIS 250,000 and qualifies for simplified release in some circumstances.

For larger estates, an ishur nikui application must be filed with the Israel Tax Authority's non-resident taxation unit, attaching the succession order, a calculation of any capital gains or income arising in the estate, and evidence of the deceased's Israeli asset base. This process typically takes 4–8 weeks from filing.

In Practice: Under Section 164 of the Income Tax Ordinance 1961, an Israeli bank that releases funds to a non-resident without obtaining the required tax clearance or applying the 25% withholding becomes personally liable for the unpaid tax. Banks therefore apply the withholding conservatively — meaning UK heirs who have not proactively engaged with the Israel Tax Authority will receive 75% of the released funds, with the remaining 25% remitted by the bank to the ITA. Recovering the withheld 25% requires filing an Israeli tax return for the estate year demonstrating that the applicable tax was lower than the withheld amount. This refund process typically takes 6–18 months from filing, and requires retaining an Israeli tax accountant to prepare the return.

Step 5: International wire transfer to the UK. Once compliance and tax clearance are resolved, the bank executes a SWIFT transfer to the nominated UK bank account. Israeli banks charge a transfer fee (typically NIS 30–80 per wire) plus SWIFT correspondent bank fees (USD 15–40). The UK bank may charge an incoming international wire fee (GBP 5–25). Exchange rate: the bank converts NIS to GBP at the interbank rate minus a spread (typically 0.5–1.5%); for large transfers above NIS 500,000, negotiating the rate directly with the bank's treasury desk saves meaningful amounts.

HMRC reporting. UK heirs who inherit Israeli funds or property are required to report the inheritance to HMRC if the total estate exceeds the UK inheritance tax nil-rate band (£325,000 per individual as of 2024/25). The UK does not impose capital gains tax on the act of inheriting; however, any gain on a subsequent sale of inherited Israeli assets must be reported. UK heirs should also consider whether they have any HMRC obligation to report the inherited Israeli account under the rules for foreign income and assets.

For a broader view of the complete Israeli probate process for non-residents — including succession order applications and the coordination of multiple Israeli assets — see the guide to Israeli probate for non-residents.

Key Considerations

• A succession order from the Israeli Family Court is an absolute prerequisite — banks will not release funds without it, regardless of the clarity of the inheritance entitlement.
• The Israel Tax Authority's 25% withholding applies to non-resident heirs by default; proactively applying for an ishur nikui reduced-rate certificate prevents a significant cash flow shortfall and a long refund wait.
• UK heirs must complete CRS self-certification at the Israeli bank, confirming their UK tax residency — this automatically triggers information sharing between the Israeli bank and HMRC.
• The bank's internal AML compliance review typically adds 4–6 weeks after the succession order is presented — plan for a total release process of 4–10 weeks from that point.
• HMRC inheritance tax reporting obligations may apply if the total estate (including Israeli assets) exceeds the UK nil-rate band of £325,000.

When to Consult a Lawyer

This question typically requires professional legal advice when:

• The deceased had accounts at multiple Israeli banks and the estate requires coordinated release from each institution — the succession order must be separately presented to each bank, and timing coordination across multiple institutions requires oversight.
• The Israel Tax Authority's 25% withholding has already been applied to a partial release and you want to recover the over-withheld amount through an Israeli tax return.
• The Israeli bank's compliance team has placed a hold on the account beyond the normal processing period, citing AML concerns — resolving these holds requires direct legal engagement with the bank's compliance department.
• The estate also includes Israeli real estate or a company shareholding, and the overall inheritance requires coordinated legal management across multiple asset types and authorities.

A qualified Israeli attorney should manage the succession order application, the ITA withholding application, and the bank presentation sequence as a coordinated process.

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Speak With an Israeli Attorney

Releasing inherited Israeli bank funds from the UK requires coordinated legal management across the Israeli Family Court, the Israel Tax Authority, and the Israeli bank — each on their own timeline. Adv. Eli Shimony handles the full process for UK heirs, from succession order application through to the final wire transfer to your UK account.

Contact us for a confidential initial consultation.