Quick Answer: Israeli law allows you to create a trust (ne'emanut) under the Trust Law 5739-1979, placing Israeli assets in the hands of a designated trustee who manages and distributes them for your chosen beneficiaries. A properly funded living trust transfers Israeli property to your heirs on death without a probate application, bypassing the 6-18 month succession order process. Foreign nationals with Israeli real estate or bank accounts increasingly use this structure to avoid months of bureaucracy and keep the distribution out of public records.

When a foreign national owns property in Israel and dies, their heirs face a multi-step legal process before receiving anything: a succession order (tzav yerusha) or probate order (tzav kiyum tzava'ah), apostille-certified documents from two countries, Hebrew translations, a 45-day publication period in the official gazette, and often many months of waiting. If the estate also includes assets outside Israel, the complexity compounds. An Israeli trust sidesteps a significant part of that process for assets placed inside it.

Foreign nationals who own Israeli property often discover too late that their home-country will does nothing to speed up the Israeli process. What follows explains what a trust can and cannot do under Israeli law, what it costs to set one up, and what the Tax Authority expects once it is in place. Specific law sections, named authorities, cost figures, and timelines are included throughout.

1. What Is a Trust (Ne'emanut) Under Israeli Law?

Under Section 2 of the Trust Law 5739-1979 (Hok HaNe'emanut), a trust is a legal relationship in which one party — the settlor (meyaneh) — transfers ownership of assets to a trustee (na'aman), who holds and manages those assets for the benefit of one or more beneficiaries (neheneh). The relationship is governed by the deed of trust (shtar ne'emanut) and by the Trust Law's default rules wherever the deed is silent.

Three parties form every Israeli trust:

  • Settlor (meyaneh): the person who creates the trust and contributes the assets.
  • Trustee (na'aman): the person or company who holds legal title to the assets and manages them according to the deed.
  • Beneficiary (neheneh): the person or persons who receive the economic benefit of the trust assets.

Unlike Anglo-American trust law, which rests on centuries of English equity doctrine, the Israeli trust is a codified statutory creation. The Trust Law sets out the trustee's duties (Sections 10-15), the beneficiary's rights to information and distributions (Sections 19-24), and the rules on creation, amendment, and termination (Sections 3-9). Israeli courts interpret trust deeds under this framework rather than importing foreign case law.

The key estate planning feature is straightforward: once assets are transferred to the trustee, they no longer belong to the settlor. They do not form part of the settlor's estate on death. The trustee already holds legal ownership and can distribute to beneficiaries immediately under the deed's terms, with no court application required for assets held in the trust.

In Practice: The Trust Law 5739-1979 has no citizenship or residency requirement for any of the three trust parties. A US resident can be the settlor, an Israeli attorney's law firm can act as trustee, and the beneficiaries can be grandchildren living in France. The Ministry of Justice does not maintain a public register of trusts; the trust relationship is created by the deed alone. For real estate, the trustee's ownership must also be registered in the Israel Land Registry (Tabu) to bind third parties. The deed alone does not transfer immovable property under Israeli law.

2. Types of Trust Available for Israeli Estate Planning

The Trust Law recognizes several types of trust. For estate planning purposes, two structures dominate.

Living Trust (Inter Vivos Trust)

A living trust is created under Section 3 of the Trust Law during the settlor's lifetime. The settlor transfers assets (Israeli real estate, bank accounts, securities) to the trustee while alive. On the settlor's death, those assets pass to the beneficiaries under the deed's distribution instructions without any probate application. This is the most common structure used by foreign nationals for Israeli real estate because it avoids the succession order process entirely for trust assets.

Testamentary Trust

A testamentary trust is created by a will (tzava'ah) under Section 17 of the Trust Law. The trust takes effect on the settlor's death, at which point assets pass from the estate to the trustee. Unlike a living trust, a testamentary trust still requires probate, because the trust is activated through the will, and the will must be admitted through the Inheritance Registrar before the trustee can act. A testamentary trust is useful for complex multi-beneficiary arrangements where control during the settlor's lifetime is not a concern, but it does not save the probate step.

Revocable vs. Irrevocable

The Trust Law allows a settlor to specify whether the trust can be changed or ended. A revocable trust gives the settlor continued flexibility. Under Section 7, the deed can permit the settlor to amend terms, withdraw assets, or terminate the trust entirely. An irrevocable trust cannot be changed by the settlor alone after creation; a court application under Section 9 is required in limited circumstances.

For Israeli income tax purposes, revocability matters. A revocable trust with a living foreign settlor is generally treated as "transparent": the Israel Tax Authority (ITA / Rashut HaMisim) taxes the settlor on trust income rather than the trust entity. An irrevocable trust may be treated as a separate taxable unit under Chapter 5A of the Income Tax Ordinance. Get written tax advice before choosing between the two.

In Practice: Most foreign nationals with Israeli property use a revocable living trust during their lifetime (preserving the right to change beneficiaries or withdraw assets) that automatically becomes irrevocable on the settlor's death. This requires careful drafting of the transformation clause in the deed under Sections 3 and 7 of the Trust Law 5739-1979. The change in ownership from the settlor to the trustee must be registered at the regional Israel Land Registry office in Tel Aviv, Jerusalem, Haifa, or Beer Sheba, depending on the property's location. Registration fees are typically around 0.5% of the stated property value (minimum NIS 550). Notarizing the deed of trust before an Israeli notary public (noter) costs approximately NIS 1,500-4,000 depending on document length and complexity.

3. How a Living Trust Helps You Avoid Israeli Probate

To appreciate the value of a trust, consider what heirs face without one. The standard process for a foreign national's estate in Israel runs as follows:

  1. Apply to the Inheritance Registrar (Rasham HaYerushoth) at the Ministry of Justice in Jerusalem for a succession order (tzav yerusha, for estates without a will) or a probate order (tzav kiyum tzava'ah, for wills). The 2026 application fee is NIS 453, paid online or in person.
  2. Submit supporting documents: the death certificate apostilled by the issuing country, a sworn Hebrew translation by a court-recognized translator, the original will (if any), and heir identification documents, also apostilled and translated.
  3. Wait for the Ministry of Justice to publish a 45-day notice period in Reshumot (the official gazette) and in a newspaper, allowing creditors and competing heirs to object.
  4. Receive the succession or probate order after the notice period closes, assuming no objections. For straightforward, uncontested cases, total elapsed time from application to order: 4-9 months. Multi-jurisdictional cases involving foreign wills or disputed assets routinely take 12-24 months or longer.
  5. Present the order to each asset holder individually: the Land Registry, each bank, the Central Securities Depository (TASACH), and any other institution. Each processes the transfer separately, which may add several additional weeks.

A properly funded living trust eliminates steps 1-4 for trust assets. When the settlor dies, the trustee already holds legal title. The trustee acts under the trust deed immediately, notifying each asset holder of the settlor's death and presenting the trust deed. Banks require proof of death and a legal opinion confirming the trustee's authority, but there is no formal probate application, no gazette publication, and no mandated waiting period.

In Practice: The time saving is material. A typical Israeli succession or probate application currently takes 6-18 months from the date of death; complex cross-border cases with foreign wills have taken 2-3 years. A trust distribution can be completed in 6-12 weeks for straightforward cases, from the date of death to the beneficiary receiving the property or proceeds from its sale. For heirs living outside Israel who need to liquidate Israeli property quickly to cover estate costs, fund care arrangements, or avoid maintaining a property they cannot manage from abroad, this difference is practically significant.
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4. Creating an Israeli Trust: The Step-by-Step Process

Creating an Israeli trust for real estate and other assets involves five concrete steps.

Step 1: Draft the deed of trust

Section 3(a) of the Trust Law requires the deed to be in writing. No prescribed form exists, but a well-drafted deed covers:

  • Full identification of the settlor, trustee, and each beneficiary
  • A precise description of the assets transferred (for Israeli real estate, include the block and parcel number (gush/helka) as registered in Tabu)
  • The trust's purpose and distribution instructions (who gets what, when, and under what conditions)
  • Trustee powers and investment authority under Sections 10-15 of the Trust Law
  • The succession trustee — who takes over if the primary trustee dies, resigns, or loses capacity
  • Revocability provisions and the conditions under which the trust terminates
  • Governing law: Israeli law governs Israeli assets; specifying this expressly avoids conflicts of law arguments later

Step 2: Execute before a notary

The deed should be signed before an Israeli notary public (noter). Notarization is not strictly required for trust creation under the Trust Law, but it is a practical necessity — the Land Registry and Israeli banks will not act on an unnotarized deed. Notary fees for trust deeds run NIS 1,500-4,000 depending on the notary's office and document length. If the settlor is abroad, the deed can be notarized locally and then apostilled, but an Israeli notary's involvement at some stage simplifies the Land Registry process.

Step 3: Transfer ownership to the trustee

For real estate, file a request to register the change of ownership from the settlor to the trustee at the relevant regional Land Registry office. Required documents include:

  • The notarized deed of trust
  • A current ownership extract (nesach tabu) — obtainable online through the Ministry of Justice portal
  • Identity documents for the settlor and trustee (with apostille and Hebrew translation for foreign documents)
  • A purchase tax clearance certificate or exemption letter from the Israel Tax Authority, confirming no purchase tax is due on the transfer to trust (transfers to trust are generally exempt under the Land Taxation Law 5723-1963, but the ITA confirmation must still be obtained)

Processing time at the Land Registry: 3-6 months for standard applications. The Ministry of Justice's online shamas tracking system allows you to monitor application status. Urgent applications (bediyun dekhuf) can be flagged for faster processing in specific circumstances.

Step 4: Notify Israeli banks and financial institutions

Each bank holding assets you want inside the trust requires a copy of the trust deed, a notarized letter of trustee authority, and an Israeli legal opinion confirming the trust's validity and the trustee's powers. Banks may impose their own internal compliance review, which typically takes 2-6 weeks. Securities accounts held at Israeli brokers or through the Tel Aviv Stock Exchange clearing system (TASACH) follow a similar notification process.

Step 5: Keep the trust current

Any amendment to the trust requires a written instrument executed in the same manner as the original deed (notarized, updated at the Land Registry for real estate assets). Section 7 of the Trust Law allows amendment where the deed so provides. Practically, review the deed after any major life event: marriage, divorce, the birth of a child, the sale or purchase of Israeli property, or a change in the trustee's circumstances.

In Practice: Many foreign settlors use an Israeli attorney or their attorney's professional trustee company as the trustee, rather than appointing a family member. This avoids the practical problem of a foreign individual trustee needing to interact with Israeli institutions from abroad. Israeli attorney-trustees are bound by Bar Association rules and professional liability insurance, which provides a layer of protection for beneficiaries. Trustee fees vary: for a dormant trust holding a single property, expect NIS 3,000-8,000 per year; for active management involving rental collection and maintenance, NIS 8,000-20,000 annually depending on scope.

5. Tax Implications for Foreign Nationals

Israeli trust taxation is governed by Chapter 5A of the Income Tax Ordinance (Pekudat Mas Hachnasa), which was added in 2006 through Tax Amendment 147. The chapter creates a classification system based on the residency of the settlor and beneficiaries.

Income tax during the trust's lifetime

A trust with a foreign resident settlor and foreign resident beneficiaries that holds Israeli-source income — rental income from Israeli property, dividends from Israeli companies, or capital gains on Israeli assets — is classified as a "foreign resident trust" (ne'emanut toshav chutz). Such a trust pays Israeli income tax on Israeli-source income at the same rates that apply to foreign individuals: 25% on capital gains from securities, 15-25% on rental income, and 47% on ordinary income above certain thresholds.

If the settlor is a foreign resident but the beneficiary is an Israeli resident, the trust is reclassified as an "Israeli resident trust" and taxed accordingly from the date the Israeli beneficiary's residency begins. This reclassification can happen mid-trust without any change to the deed, so the trustee must monitor beneficiary residency status on an ongoing basis.

Capital gains when the trustee sells Israeli real estate

The transfer of real estate from the settlor into the trust is not treated as a sale for Israeli tax purposes — no mas shevach (land betterment tax under the Land Taxation Law 5723-1963) or mas reval (capital gains) is triggered. When the trustee eventually sells the property, the taxable gain is calculated from the original purchase price the settlor paid, not the date the property was transferred to the trust. This "step-in-the-shoes" treatment applies regardless of how many years the property has been in the trust.

No inheritance or estate tax

Israel abolished its estate duty in 1981 and has not replaced it. Transfers within the trust on the settlor's death — from the trustee to beneficiaries — are not taxed as inheritance. Capital gains realized on a subsequent sale by a beneficiary who receives property from the trust will, however, continue to track the original purchase price.

In Practice: The Israel Tax Authority's Trust Reporting Unit (Yehidath Divuch HaNe'emanuyoth) within the International Taxation Division (Machon LeMas Bein Leumi) handles annual trust filings. Foreign resident trusts with Israeli income must file an annual trust report (doch shnatit) with the ITA by April 30 of the following tax year. Late filing triggers a NIS 500 per-month penalty under Section 216 of the Income Tax Ordinance, which accumulates without cap. Failure to file for three or more consecutive years can be referred for criminal investigation. Engaging an Israeli-licensed tax advisor (not only a lawyer) from the outset is essential — the filing obligations are separate from the legal creation of the trust, and practitioners regularly see trusts that are legally valid but administratively non-compliant.

US citizens and green card holders must separately report foreign trusts to the IRS on Form 3520 (Annual Return to Report Transactions with Foreign Trusts). The penalty for failure to file Form 3520 is 35% of the gross value of distributions received from the foreign trust or of the gross value of assets transferred. This is a US obligation independent of Israeli law.

6. Coordinating with Your Foreign Estate Plan

An Israeli trust functions best when integrated with your home-country estate documents from the start. Several specific issues arise for cross-border estates.

Scope your foreign will to exclude trust assets

Your home-country will should explicitly state that it does not govern assets held in the Israeli trust. If your US or UK will purports to dispose of "all my real estate worldwide" but the Israeli apartment is legally owned by the Israeli trustee, two courts in two countries may need to resolve the conflict. A simple carve-out clause ("This will does not apply to assets held in the Israeli trust dated [date] governed by Israeli law") prevents this.

Governing law and conflict of laws

Israeli courts will apply the law of the situs — the country where the asset is located — for real property in any event, regardless of what a foreign will or deed says. For Israeli real estate, Israeli law governs. Specifying this expressly in the trust deed removes ambiguity and reduces the risk of a foreign court trying to apply foreign law to an Israeli asset.

Foreign trustee considerations

The Trust Law allows a foreign individual or foreign trust company to act as trustee for Israeli assets. In practice, the Israel Land Registry requires an address for service of legal process within Israel, and Israeli banks typically require an Israeli-resident co-trustee or local legal agent before acting on trust instructions. Using an Israeli attorney or Israeli trust company as the sole or co-trustee avoids these friction points.

Dual-will structure for cross-border estates

A widely used structure for foreign nationals with assets in Israel and abroad is to maintain two coordinated documents: an Israeli will or Israeli trust deed (covering Israeli assets) and a home-country will (covering everything else). Each document is explicitly scoped to its jurisdiction, and each country's probate process operates independently. This is simpler to administer on death than a single worldwide will, which must be recognized in Israel through a separate court application even when accompanied by an apostille.

In Practice: When coordinating Israeli and foreign estate documents, foreign-language materials submitted to the Israel Land Registry or Israeli courts must be translated by a sworn translator recognized by an Israeli court or the Ministry of Justice. Budget NIS 200-500 per page for certified legal translation from a reputable Tel Aviv or Jerusalem translation firm. Typical turnaround: 5-10 business days per document set for standard language pairs (English, French, German, Russian). For languages with fewer certified translators (Dutch, Polish, certain Eastern European languages), plan for 2-3 weeks and verify translator accreditation in advance. Apostille authentication in the country of origin adds additional lead time: for US documents, typically 3-6 weeks through the relevant Secretary of State's office; for UK documents, typically 2-4 weeks through the Foreign, Commonwealth and Development Office.

7. Common Pitfalls to Avoid

1. Signing the deed but forgetting the Land Registry

The most common mistake: a settlor signs a well-drafted trust deed but never files the change of ownership at Tabu. Until the Land Registry reflects the trustee as legal owner, the property still legally belongs to the settlor and will form part of the probate estate on death. The trust deed alone does not transfer real property under Israeli law; registration is required under the Land Law 5729-1969 (Section 6). An Israeli trust for real estate is only as effective as its Land Registry entry.

2. Relying on a foreign will alone for Israeli real estate

A foreign will requires recognition in Israel through a separate court application — even with an apostille and Hebrew translation. Under the Inheritance Law 5725-1965 (Section 76), a foreign will can be probated in Israel, but the process still takes several months. Foreign nationals who own Israeli real estate and have only a home-country will have not simplified their heirs' task in Israel.

3. No successor trustee named in the deed

If your trustee dies, resigns, or loses legal capacity and no successor is named in the deed, someone must apply to the Family Court under Section 22 of the Trust Law to appoint a replacement. Court appointments take months, during which the trust assets may be frozen. Naming at least one successor trustee (and ideally a second alternate) in the original deed costs nothing and avoids a serious practical problem.

4. Missing annual reporting obligations

If the trust earns Israeli-source income — rental income, interest from Israeli bank accounts, dividends — annual trust reports must be filed with the ITA by April 30 of the following year. Many foreign settlors and trustees are unaware of this obligation because no proactive notice is sent. The NIS 500 per-month late filing penalty accumulates silently. By the time someone discovers the non-compliance, the penalties may exceed the original tax due.

5. Treating the trust as a personal account

Once assets are transferred to the trust, the settlor must treat them as belonging to the trust, not to themselves personally. Using trust-held property as a personal residence without documented market-rate consideration, co-mingling trust and personal funds, or directing trust income into personal accounts all risk giving the ITA grounds to disregard the trust as a sham under the substance-over-form doctrine. Keep trust assets and personal assets completely separate, and document any arrangement between the settlor and the trust in writing.

In Practice: The Israel Tax Authority has the authority to disregard a trust and attribute its income directly to the settlor or beneficiary if the trust lacks economic substance or was structured primarily to reduce tax (Section 86 of the Income Tax Ordinance — the general anti-avoidance rule). This does not mean trusts are suspect; it means the deed must reflect a genuine transfer of control and economic interest, not merely a change of title on paper. Trusts created for legitimate estate planning purposes — asset protection, orderly succession, management during beneficiary incapacity — have consistently withstood ITA scrutiny when properly documented.