Is an inheritance or gift received during marriage excluded from the marital estate when dividing assets on divorce in Israel?

The Spouses (Property Relations) Law 5733-1973 governs asset division for couples married in Israel after January 1, 1974. The law's default regime — izun mashbayot (balance of resources) — entitles each spouse to half the net increase in the marital estate accumulated during the marriage. Section 5(1) carves out inherited assets from this calculation: anything received by one spouse through inheritance or as a gift is specifically excluded from the balance, regardless of when during the marriage the inheritance was received. The exclusion also covers gifts received from third parties, not just family bequests. The underlying rationale is that inherited property reflects an external family transfer rather than a jointly created marital asset, so it would be inequitable to include it in the equalization pool.

The exclusion is not automatic — it must be demonstrated, and it can be lost. If the inherited funds or property have been mixed into a joint bank account, used to pay off a joint mortgage, or converted into a home used by both spouses, Israeli courts may treat the asset as having been absorbed into the marital estate through a process courts call bioul (absorption or commingling). Foreign nationals who inherit Israeli assets during a marriage and want to preserve those assets as separate property should keep them in a dedicated separate account, document the inheritance clearly, and avoid using the inherited funds for joint household purposes. A financial agreement (heskem mamon) approved by the Family Court — before or during the marriage — is the most reliable way to document the separate character of inherited or gifted assets and prevent disputes on divorce.

From the full guide: Division of Assets on Divorce in Israel: What the Law Provides

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