ISRAEL Law and Practice Contributed by: Yaron Mehulal, Nataly Davidai and Shalom Hershkovitz, FISCHER (FBC & Co.)
Additionally, if the agreement is executed during the marriage ceremony, the officiant, if authorised to do so, can approve the agreement. 2.5 Transfer of Property Property transferred as a tax-free gift among individu - als, or upon inheritance, will retain its original cost basis for purposes of future sale as well as for purpos - es of depreciation. It is possible to request a pre-ruling from the Israel Tax Authority for a step-up in the origi - nal cost, when an Israeli tax resident receives (whether as a gift or inheritance) a property from abroad. 2.6 Transfer of Assets: Vehicle and Planning Mechanisms The major vehicles for transferring assets within an Israeli family are gifts, inheritances and trusts. Some - times, a combination of these tools is used. For exam - ple, a will can provide for the creation of a trust under its terms; certain shares in a family holding company can be gifted during the lifetime of the donor, while others can be transferred into a trust for the benefit of future generations; and children can be included as co-owners of family bank accounts. Unless the younger generation are not Israeli tax residents, taxes are not a factor in choosing the most suitable mechanism, as there are currently no gift, estate or generation-skipping taxes in Israel. 2.7 Transfer of Assets: Digital Assets Israel has not legally addressed the issue of digital assets inheritance. Thus, it is claimed that the Israeli Inheritance Law, 5725-1965 does not apply to digi - tal assets lacking real monetary value such as email accounts, unless specifically addressed in a valid will. Hence, if the deceased has not left a will or has left a will without mentioning their digital assets, it is ques - tionable whether they will be subject to or affected by an order of probate. In 2012, in the case of Schwartzman v Psagot Pension Funds , the Tel Aviv District Court recognised that the ownership rights of the deceased’s heirs override the deceased’s right to privacy. It is therefore thought that the courts would most likely uphold the heirs’ rights to receive control over digital assets, if such a case were brought before the courts. Thus, in practice, certain Israeli communication companies allowed the heirs
access to the deceased’s email accounts, subject to their internal procedures, while others requested the heirs to obtain a court order. To clarify the legal situation, the Israeli legislature passed on July 2024 the Access to Digital Content Upon a Person’s Death Law, 5784-2024, which regulates the access to the deceased’s digital assets, and lets the deceased determine, during their lifetime, what will happen to their personal digital content after their death. As for cryptocurrency assets, the Lod District Court in the case of Kopel v Rehovot Income Tax Asses- sor recognised Bitcoin as a financial asset, subject to capital gains tax on profits derived from its sale. Hence, the Israeli Inheritance Law should apply to cryptocurrency, as it does to any other valuable asset. In any case, it is recommended to detail any digital and cryptocurrency assets, including usernames and passwords, in the will (or at least in an annex to the said will). 3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Israel, being a common law country based upon the English legal system, recognises the validity of trusts and foundations. Israel’s Trust Law, 5739-1979, which is the main law regulating trusts, recognises four main types of trusts: • a private trust; • a private trust dedicated by a deed or a will in favour of one or more third-party beneficiaries (also known as a private hekdesh ); • a testamentary trust; and • a charitable trust called a public hekdesh . For estate planning purposes, Israelis tend to use either a very detailed private trust for the benefit of third parties – a private hekdesh – or a comprehensive testamentary trust, each regulated by Israel’s Trust Law. Nonetheless, due to the fact that the legal struc - tures available under Israel’s Trust Law are insufficient,
279 CHAMBERS.COM
Powered by FlippingBook