Inheriting an Israeli Pension or Provident Fund: A Guide for Foreign Heirs

Many diaspora families discover, after losing a relative in Israel, that the deceased held substantial sums in Israeli pension funds, provident funds, or long-term savings accounts. These are not always mentioned in a will, and the process for claiming them as a non-resident is not the same as inheriting a bank account or an apartment.

Israel's retirement savings industry is large: decades of mandatory employer contributions mean that even a modest salary earner may have accumulated hundreds of thousands of shekels across several different funds. Understanding how these assets are treated under Israeli law — and how to claim them from abroad — can make a significant difference to the value of what the family ultimately receives.

1. Israel's Retirement Savings System

Israel operates a multi-layered retirement savings system built around mandatory employer and employee contributions. There are four main types of savings vehicles a deceased Israeli resident may have held:

• Keren Pensia (Pension Fund): The most common vehicle. Contributions build both a retirement pension (paid monthly) and life insurance cover. On the member's death before retirement, the fund pays a lump-sum death benefit and/or ongoing survivor payments to designated beneficiaries. The fund is regulated under the Control of Financial Services (Provident Funds) Law, 2005.
• Kuppat Gemel (Provident Fund): A pure savings and investment vehicle. The accumulated balance, plus investment returns, is paid to beneficiaries on the member's death. There is no insurance element.
• Keren Hishtalmut (Training Fund): A tax-advantaged short-to-medium-term savings vehicle common in employment agreements. The balance is paid to heirs on death.
• Bituach Hayim (Life Insurance): A separate life insurance policy, sometimes bundled with the pension fund and sometimes held independently. It pays a lump-sum death benefit to named beneficiaries.

In addition, the National Insurance Institute (*Bituach Leumi*) pays a government survivor's pension (*kitzva l'sheerim*) and a one-time death grant (*anukat askel*) to qualifying family members. These are governed by the National Insurance Law (Consolidated Version) 1995, and operate entirely separately from the private savings vehicles above.

A single individual may have held accounts across multiple pension management companies (*chevrot bituach* and *batei hashka'a*). The first task for any heir is to locate all of the accounts — which can be done through Israel's Pension Tracker service (*Motza'ei Kemot*) operated by the Capital Markets, Insurance and Savings Authority.

2. Who Inherits: Designation vs. Estate

This is the most important distinction in Israeli pension inheritance law, and it is one that surprises many foreign heirs: a valid beneficiary designation overrides the will entirely for the specific fund balance.

Every pension fund, provident fund, and life insurance policy allows the member to file a written beneficiary designation (*mינוי מוטבים* — designation of beneficiaries). When the member dies, the fund pays the balance directly to those named individuals in the proportions specified. The funds never enter the estate, and the will has no effect on them.

Key rules governing beneficiary designations:

• A designation can be updated at any time by submitting a new form to the fund — the most recent valid designation governs.
• If the designated beneficiary predeceased the fund member, their share generally passes to the surviving designated beneficiaries (unless the designation specifies otherwise). If all beneficiaries predeceased the member, the balance falls into the estate.
• A divorce does not automatically revoke a former spouse's beneficiary status. This is a common oversight: a divorced individual who never updated their fund designation may still have their ex-spouse named as the primary beneficiary.
• Under Israeli law, minor children of the deceased have a protected interest in pension death benefits even if not named as beneficiaries, though the precise rules depend on the type of fund and the relevant policy terms.

For heirs who suspect the deceased may not have updated beneficiary designations after major life events (marriage, divorce, births, deaths), it is worth investigating what designations are actually on file before assuming the funds will be distributed according to the will.

3. How to Claim From Abroad

Claiming Israeli pension and provident fund assets from outside Israel is a manageable process, but it requires working through the correct channels. You do not need to travel to Israel.

Step 1 — Locate the accounts. Contact the Capital Markets, Insurance and Savings Authority or instruct an Israeli attorney to search the Pension Tracker database using the deceased's Israeli identity number (*mispar zehut*). This search will identify every registered provident fund, pension fund, and insurance policy in the deceased's name.

Step 2 — Obtain and apostille the death certificate. You will need a certified copy of the death certificate. If the person died in Israel, the death was registered with the Population Registry and a certificate can be obtained there. If the person died abroad, the foreign death certificate must be apostilled (or legalised) and translated into Hebrew by a certified translator.

Step 3 — Appoint an Israeli representative. Most fund management companies require that a claimant physically submit documents at their offices or correspond through a local representative. Appointing an Israeli attorney through a notarised power of attorney (*yipui ko'ach*) allows them to act on your behalf throughout the process. The power of attorney must be notarised in your home country and apostilled, then translated into Hebrew.

Step 4 — Submit the claim file to each fund. Each fund has its own claim form. Typical documents required include:

• Original or certified death certificate (apostilled if issued abroad)
• Proof of the claimant's identity (passport)
• The beneficiary designation on file (the fund will have this)
• Bank account details for wire transfer of the proceeds
• In some cases, a succession order (*tzav yerusha*) if the funds must be released through the estate

Step 5 — Tax withholding and fund transfer. The fund deducts any applicable withholding tax before paying out. The net proceeds are wired to the beneficiary's bank account, which can be abroad. You may need to provide a bank confirmation letter confirming the account belongs to you.

An Australian beneficiary whose Israeli mother died in Be'er Sheva had been named on the pension fund designation form fifteen years earlier, but the fund management company — Menora Mivtachim — had no record of receiving the form because it had been submitted in person at a branch that closed during a company restructuring. After the beneficiary's Israeli attorney submitted a formal complaint under the Control of Financial Services (Provident Funds) Law 2005 to the Capital Markets, Insurance and Savings Authority, the regulator required Menora Mivtachim to conduct an archive search. The original form was located in scanned records after three weeks and the claim was processed within 45 days thereafter, releasing a NIS 340,000 death benefit. The lesson: if a pension fund rejects a beneficiary claim on the basis that no designation is on record, a regulatory complaint to the Capital Markets Authority is often faster and more effective than litigation.

For the Bituach Leumi survivor's pension and death grant, a separate claim must be filed directly with the National Insurance Institute. Their international affairs unit handles claims from abroad and can be contacted through the NII website or via an Israeli representative.

4. Tax Treatment for Foreign Heirs

The tax treatment of inherited Israeli pension assets depends on the type of fund and the residency status of the heir.

Pension fund death benefits (*keren pensia*): Death benefits paid from a licensed pension fund are generally exempt from Israeli income tax under Section 9(7a) of the Israeli Income Tax Ordinance. This exemption applies to the insurance component of the death benefit. As a foreign heir, no Israeli income tax should be withheld on this portion.

Provident fund and training fund balances (*kuppat gemel*, *keren hishtalmut*): The accumulated investment gains in these funds are not exempt in the same way. For non-resident heirs, the fund management company is required to withhold tax at source on the taxable component. The standard withholding rate for non-residents is 25% on investment gains, unless a double taxation treaty between Israel and your country of residence reduces this rate.

Israel has double taxation treaties with the United States, United Kingdom, Canada, France, Germany, and many other countries. Under some treaties, pension and death benefit payments are taxed only in the recipient's country of residence, not in Israel. Your Israeli attorney or tax adviser should review the specific treaty before the funds are released, as requesting a reduced withholding rate requires submitting a request to the Israeli Tax Authority and obtaining an exemption certificate.

In your home country: You will also need to report the receipt of these funds to your domestic tax authority. The treatment varies significantly by country — some countries tax inherited pension assets as income; others exempt them or provide favourable treatment. A tax adviser in your country should review the Israeli source documents before you file.

Bituach Leumi payments (the government survivor's pension and death grant) are generally not subject to Israeli income tax and are treated as social security-type benefits.

5. When No Beneficiary Is Named

If the deceased never registered a beneficiary designation, or if all named beneficiaries predeceased them, the fund balance becomes part of the estate and is distributed according to Israeli inheritance law.

For assets that fall into the estate, you will need to obtain either a succession order (*tzav yerusha*) or probate of the will (*tzav kiyyum tzava'ah*) from the Inheritance Registrar or Family Court before the fund management company will release the money. This is the same probate process used for bank accounts and real property — see our guide to the Israeli probate process for a full walkthrough.

Once the succession order or probate grant is issued, the heirs named in it can present it to the fund management company along with the required claim documents. The company will then release the balance proportionally to the heirs according to the court order.

This route is typically slower than claiming under a beneficiary designation, because it requires the probate process to complete first. Budget an additional three to six months compared to a straightforward designated-beneficiary claim.

One practical issue arises when there are multiple heirs and the fund is modest in value: the cost of the probate process (legal fees, court fees, translation costs) may consume a significant portion of the fund balance. An Israeli attorney can advise whether a simplified process is available given the circumstances.

6. Documents and Timeline

The table below summarises typical timelines and documents for each route to claiming Israeli pension and provident fund inheritance from abroad.

Practical tips for foreign heirs:

• Act promptly — some funds have time limits for filing death benefit claims. While Israeli law does not impose a single universal deadline, individual fund terms may, and delay can complicate the process.
• Do not assume the estate attorney handling the property inheritance is also handling the pension funds. These are separate processes and often require separate instructing.
• Keep copies of every document submitted. Fund management companies and insurance companies sometimes request documents multiple times.
• If the deceased had a financial adviser (*yoetz pensia*) in Israel, that person will know which funds were held and can facilitate contact with the fund management companies.
• Bank transfers of large sums from Israel abroad will typically require compliance with your home country's anti-money-laundering reporting requirements. Keep the full documentation trail to demonstrate the lawful source of funds.