Inheriting Israeli Assets — A US Tax Survival Guide

Why Inheriting Israeli Assets Is Genuinely Complicated

Most Americans receiving an inheritance from a US relative deal with a single legal system, a single set of tax rules, and a single set of advisors. The estate goes through US probate, the executor handles US tax filings (706 if applicable, final 1040, fiduciary returns), the heir gets a stepped-up basis, and life moves on.

An American inheriting Israeli assets is dealing with something quite different:

• Two probate systems — Israeli "tzav kiyum yerusha" (succession order) running in parallel with US procedures if the decedent had US-situs assets too
• Two tax regimes — Israel has no estate tax (and abolished its inheritance tax in 1981), but the US has Form 3520 reporting plus US tax on post-inheritance income
• Two currencies and two banking systems — Israeli banks have famously strict KYC rules for inherited accounts held by foreign heirs
• Two language and legal cultures — Israeli succession orders, kupot gemel paperwork, Tabu (land registry) transfers, and inheritance certificates are all in Hebrew
• Tight US deadlines — Form 3520 is due with your tax return for the year of receipt, and the penalty for missing it is severe

Israeli Probate: Tzav Kiyum Yerusha Explained

If a relative in Israel dies — whether or not they left a will — Israeli succession law governs the assets located in Israel. There are two parallel procedures:

Tzav Kiyum Yerusha (Succession Order — When There's No Will)

If the decedent died intestate (no will), Israeli law of intestacy applies. The Israeli Inheritance Law (1965) defines who inherits and in what shares: spouse, then children, then parents, then siblings, etc. To take ownership of any Israeli asset, heirs must obtain a Tzav Kiyum Yerusha from the Israeli Registrar of Inheritance (Rasham Yerushot).

Tzav Kiyum Tzava'a (Probate Order — When There's a Will)

If the decedent left a will, the heirs apply for a Tzav Kiyum Tzava'a (probate of the will). The Registrar reviews the will for validity and issues an order recognizing the will and identifying heirs.

Where to File

Both procedures are filed with the Registrar of Inheritance. There are five regional offices (Jerusalem, Tel Aviv, Haifa, Beer Sheva, Nazareth). The location depends on where the decedent had their last residence.

Timeline

Realistic timeline from death to issuance of the order:

• Uncontested cases (no challenges): 4–9 months
• Cases with foreign heirs: 6–12 months (extra time for documentation, apostilles, translations)
• Contested cases: 12–36 months (transferred to Family Court)

Documents American Heirs Need to Provide

• Notarized declaration of heir status (typically prepared by Israeli attorney; signed before US notary)
• Apostille on the notarized declaration (required under the Hague Convention; obtained from the relevant US Secretary of State)
• US passport copy, certified or apostilled
• Address verification (utility bill or similar)
• If married — spousal consent in some scenarios
• Sometimes: a certified family tree or genealogy declaration

Inheritance Without a Will When the Decedent Was Married

Many American heirs are surprised by Israeli intestacy rules:

• The surviving spouse inherits all of the household chattels and the family car
• The spouse takes 50% of the remaining estate; the children share the other 50%
• If no children, parents share with the spouse
• Civil/non-religious marriages performed abroad are recognized; common-law partnerships ("yedu'im b'tzibur") have inheritance rights similar to spouses

Wills Made Abroad

An American will is generally recognized in Israeli probate if it was validly executed under the law of the place where it was signed. However, Israeli courts will examine it carefully — Hebrew translation by a notary is required, and any deviation from Israeli will formalities may trigger disputes. If you have substantial Israeli assets, a separate Israeli will is almost always preferable.

The Form 3520 Trap

This is the single most important thing for any American inheriting Israeli assets to understand.

What Form 3520 Is

Form 3520 is the IRS information return for "Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts." Despite the name, the most common use case for Israeli olim and diaspora Americans is reporting foreign gifts and bequests — which includes inheritances from foreign individuals.

When You Must File

You must file Form 3520 if, during the tax year, you received:

• More than $100,000 in aggregate from a non-US individual or estate (including inheritances), OR
• More than approximately $19,570 (2024 threshold, adjusts annually) from a non-US corporation or partnership, OR
• Any distribution from a foreign trust (no minimum threshold)

For most inheritance scenarios involving Americans receiving from Israeli relatives, the $100,000 threshold is the relevant trigger.

What Counts Toward the $100,000

Cash, real estate, securities, business interests, life insurance proceeds — anything you received from the foreign individual or estate during the year. Aggregate gifts from related foreign persons count together.

The Filing Deadline

Form 3520 is due with your annual Form 1040, including extensions. So if you receive an inheritance in 2026, Form 3520 is due April 15, 2027 (or October 15, 2027 with extension).

The Penalty

Failure to file (or filing late) triggers a penalty of 5% of the gift/inheritance per month, capped at 25%. On a $1 million Israeli inheritance, that's a potential $250,000 penalty — for failing to file an information return that wouldn't have generated any actual tax.

The IRS has been increasingly aggressive in assessing Form 3520 penalties over the past 5 years. They have specifically targeted late-filed 3520s and assessed penalties even where the underlying transaction was completely lawful.

What Goes On Form 3520

For an inheritance from a foreign individual:

• Identity of the donor (the deceased)
• Date of receipt
• Description of the property received
• Fair market value at the date of receipt (in USD)
• Whether a prior gift was received from the same donor in the year

You don't need to disclose the donor's social security number or Israeli ID — and you shouldn't, since the donor is deceased.

If You Missed Form 3520

If you've already received an inheritance and didn't file Form 3520, options exist — but they require careful navigation:

• Late filing with reasonable cause — file the late return with a written reasonable cause statement explaining why the return is late. Success depends on facts. The IRS rejects most reasonable cause requests but accepts some (particularly for first-time non-filers without prior international compliance issues).
• Streamlined Foreign Offshore Procedures (SFOP) — if you also have unfiled FBARs or unreported income, SFOP can package the Form 3520 with broader compliance. We covered SFOP in detail in our FBAR guide.
• Delinquent International Information Return Submission Procedures (DIIRSP) — for cases where the only issue is missed information returns and there's reasonable cause. The IRS can still assert penalties, but DIIRSP creates a structured submission.

Step-Up in Basis — The Good News and the Bad

Basis matters when you eventually sell the inherited asset. The "basis" is what you're treated as having paid for the property, and gain on sale equals sale price minus basis.

The US Rule: Step-Up in Basis

Under US tax law (IRC §1014), inherited property generally receives a step-up in basis to fair market value at the date of the decedent's death. This is enormous. If your Israeli grandfather bought a Tel Aviv apartment in 1965 for the equivalent of $20,000 and it's worth $1,500,000 today, your US basis is $1,500,000 — not $20,000.

If you sell the apartment a year later for $1,550,000, your US capital gain is $50,000 (the post-death appreciation), not $1,530,000.

The Israeli Rule: No Step-Up

Israel does not recognize step-up in basis for inheritance purposes. Your Israeli basis is the deceased's original basis. So when you sell that same Tel Aviv apartment for $1,550,000, your Israeli capital gain is $1,530,000 (sale minus the deceased's $20,000 basis).

Israeli capital gains tax on real estate (Mas Shevach) typically runs 25% of the linear gain (different rates apply pre- and post-2014). On $1,530,000 of gain, you might pay $300,000–$380,000 of Israeli tax.

The Foreign Tax Credit Saves You — Mostly

Because you'd owe Israeli tax on a much larger gain than US tax (US $50,000 gain vs Israeli $1,530,000 gain), your Israeli tax will far exceed your US tax. The Foreign Tax Credit lets you offset US tax by Israeli tax paid. Net effect: the inherited property doesn't generate "double tax" — but you do pay full Israeli tax on the lifetime appreciation.

The Trap: Selling Too Soon vs Holding

Because Israel has no step-up, selling immediately versus holding makes a huge difference:

• Sell now: Pay 25% Israeli tax on lifetime gain — could be hundreds of thousands of dollars
• Hold and use the property: Continue to defer Israeli tax. The basis is still the deceased's basis, but the tax doesn't trigger until sale.
• Hold and rent the property: Pay annual income tax on rental income (10% Israeli flat rate is often available); Israeli capital gains tax stays deferred until sale
• Make Aliyah and become Israeli resident: May qualify for additional Israeli tax planning options on inherited foreign assets, though the step-up issue for Israeli-situs property remains

Inheriting Israeli Real Estate

Real estate is the most common type of meaningful Israeli asset Americans inherit — apartments in Tel Aviv, Jerusalem, Haifa, Netanya; land in development zones; commercial property; vacation homes in Eilat or northern Israel.

The Tabu Transfer Process

To take title to inherited Israeli real estate, the property must be transferred at the Tabu (Israel Land Registry, "Lishkat Rishum HaMekarka'in") from the deceased's name to the heirs' names. Steps:

1. Obtain Tzav Kiyum Yerusha or Tzav Kiyum Tzava'a (4–9 months — see above)
2. Order title report ("nesach Tabu") to confirm current registration
3. Pay outstanding mortgages, liens, or property taxes
4. File application for inheritance transfer at Tabu
5. Pay Tabu transfer fees (modest — typically a few hundred shekels)
6. Israeli ITA (Israel Tax Authority) filings — see below
7. Tabu issues new title in heirs' names

Israeli Tax Filings on Inherited Real Estate

Israel does not impose inheritance tax. However, certain filings are required upon transfer:

• Mas Shevach (Capital Gains) form — even though no tax is due at inheritance, the ITA requires an information form documenting the inheritance for future basis tracking
• Mas Rechisha (Acquisition Tax) — also waived for inheritance, but a "zero acquisition tax" form is filed

Holding Costs

Inherited Israeli real estate has ongoing costs:

• Arnona (municipal property tax) — typically a few thousand shekels per year, depending on location and size
• Va'ad bayit (building maintenance) — for apartment buildings, typically 200–800 shekels/month
• Property insurance
• Property management fees if rented

If You Rent the Property — US Tax Consequences

Rental income from Israeli property is reportable on your US tax return on Schedule E. You include:

• Gross rent received
• Less: deductible expenses (property tax, maintenance, management fees, insurance, depreciation)
• Less: depreciation on the building (foreign residential rental: 30-year straight line; commercial: 40-year)
• Less: Israeli tax paid (claimed as Foreign Tax Credit on Form 1116, not as deduction)

Important: if you elect Israel's 10% flat rate on rental income (available for residential rentals under certain limits), Israel doesn't allow you to deduct expenses. So your Israeli return shows gross rent × 10%. Your US return still allows full deductions including depreciation, with FTC for the Israeli 10% paid.

FBAR and 8938 Considerations

Real estate held directly is not reported on FBAR or Form 8938. But the bank account where rent is deposited is reportable, as is any escrow account, security deposit account, or holding account. See our FBAR guide for full details.

If the Inherited Property Is Held in an Israeli Holding Company

Some Israeli families hold real estate through an Israeli "Chevra Mehzeika" (holding company) — typically for liability protection or estate planning purposes. If you inherit shares of such a company:

• Form 5471 reporting may apply if the company is a CFC
• The company itself becomes subject to GILTI/Subpart F (see our GILTI guide)
• The step-up in basis applies to the shares, not to the underlying real estate inside the company
• Decisions about liquidating the company vs holding through it have significant tax consequences

For deeper coverage of cross-border real estate issues, see our companion article: Buying Israeli Real Estate as a US Citizen.

Inheriting Israeli Bank and Brokerage Accounts

Inherited Israeli bank accounts are usually the simplest asset class to handle, but Israeli banks have notoriously strict KYC (Know Your Customer) procedures for foreign heirs.

The Bank Transfer Process

1. Notify the bank of the death and request "freezing" of the account
2. Submit certified death certificate (with apostille if issued abroad)
3. Submit Tzav Kiyum Yerusha / Tzava'a once issued
4. Submit identification documents for each heir (apostilled)
5. Banks will require the heir to either (a) open a personal Israeli account in their name to receive the funds, or (b) wire the funds abroad subject to ITA "form 130" reporting

The KYC Hurdle

Israeli banks have become extremely conservative about onboarding non-resident foreign heirs since 2018. American heirs trying to open an Israeli bank account often face:

• Requests for source of funds documentation (sometimes going back generations)
• FATCA paperwork (W-9 form, IRS-approved international ID)
• Refusal to open accounts at all for non-residents — forcing heirs to wire funds abroad
• Long delays (3–6 months for non-resident account opening, if approved at all)

Wiring Funds Abroad — The ITA Form 130

If you choose to wire inherited funds out of Israel rather than open an Israeli account, the ITA requires a "form 130" certification confirming the funds are inherited (not subject to Israeli tax) and properly documented. Without it, Israeli banks are reluctant to wire large sums abroad.

US Reporting on Inherited Cash Received

• Form 3520 — if total inheritance exceeds $100K, includes the cash portion
• FBAR — if you maintain the Israeli account after inheriting, FBAR applies in subsequent years
• Form 8938 — same; applies in subsequent years if thresholds met
• 1040 reporting of post-inheritance interest/dividends — even though the principal is not taxable, interest earned after the date of death is your taxable income

Inherited Brokerage Accounts

Israeli brokerage accounts (Excellence, Meitav Dash, IBI, Psagot) holding stocks, bonds, mutual funds: same probate process, but with extra complications:

• The deceased's Israeli basis is irrelevant for US purposes — you receive a US step-up at date of death
• Israeli mutual funds and ETFs may be PFICs for US purposes (Passive Foreign Investment Companies)
• Selling PFICs you inherited triggers complex calculations under the IRS PFIC regime
• Strategy: most American heirs liquidate inherited Israeli mutual funds quickly and reinvest in US-domiciled funds to avoid years of PFIC reporting

Inheriting Kupot Gemel, Keren Hishtalmut, and Pensions

Israeli savings vehicles — kupat gemel (provident fund), keren hishtalmut (study fund), kupat pensia (pension fund) — pass to designated beneficiaries outside the standard probate process. They're handled directly by the issuing financial institution.

Beneficiary Designations Matter

If the deceased designated beneficiaries on the kupa account, those beneficiaries collect directly from the institution upon presenting:

• Death certificate
• Their own ID and apostille (if abroad)
• The kupa account number

If no beneficiary was designated, the account becomes part of the probate estate and follows tzav kiyum process.

Israeli Tax Treatment

Inheritance of kupat gemel/keren hishtalmut is generally tax-free in Israel. However, when the heir withdraws funds from the account, the distribution may be taxable depending on the type of account, the deceased's contribution history, and the heir's status.

US Tax Treatment

This is where it gets messy. The IRS treats most Israeli kupot/kerenot as foreign trusts or, in some cases, foreign financial accounts. Key US issues:

• Form 3520-A potentially required — if the kupa is treated as a foreign grantor trust, Form 3520-A applies in addition to Form 3520
• Income may not have been reported during the deceased's lifetime — many olim never reported kupa earnings on their US returns
• Inherited kupa earnings post-death are US-taxable to the heir, regardless of whether withdrawn
• FBAR and 8938 reporting apply once you inherit the kupa

What to Do With an Inherited Kupa

Practical options for an American heir:

• Withdraw and close the account — eliminates ongoing FBAR/8938/3520-A complexity. Likely Israeli tax withholding on distribution.
• Keep the account, treat it as a foreign account — file FBAR/8938 annually. Annual income reportable on 1040.
• Roll into a different Israeli vehicle — some kupot allow tax-free rollovers within Israel. May simplify or complicate US treatment depending on the new vehicle.

For most American heirs without strong reasons to maintain the Israeli account, withdrawal is the simplest path.

Inheriting Business Interests and Israeli Companies

Inheriting shares in an Israeli operating company — your father's law firm corporation, your uncle's industrial business, your grandmother's holding company — adds another layer of complexity.

Israeli Side

• Shares pass through Tzav Kiyum and are registered in heirs' names at the company's share register
• Israeli ITA notification of change in shareholders
• If the company has bank accounts, the heir-shareholder must be onboarded at each bank (KYC again)
• If the company has employees and the deceased was a director or signatory, Israeli Companies Law requires new director appointments
• If a Israeli resident director is required (most common in foreign-owned companies), see our Director Services page

US Side: Form 5471

Once you inherit shares of an Israeli company:

• If you inherit 10% or more, you become a "US shareholder" potentially subject to GILTI
• If US shareholders collectively own >50%, the company is a CFC
• Form 5471 filing is required in the year of inheritance and every subsequent year
• Penalty for non-filing: $10,000 per year per company per shareholder
• GILTI inclusions may apply to operating profits annually — even without distributions

See our GILTI guide for the full picture.

Step-Up in Basis on Shares

You receive US step-up in basis on the inherited shares to fair market value at date of death. This stepped-up basis becomes important for:

• Future sale of the shares
• Liquidation of the company
• Section 962 election analysis (basis affects tax outcome)

Practical First Steps

1. Get a valuation of the company at date of death (needed for both US and Israeli purposes)
2. Determine the company's status: operating? holding? defunct?
3. Decide on continued ownership vs. sale — sale is often cleanest for foreign heirs
4. Establish or maintain a Israeli resident director if the company stays active
5. File Form 5471 in the year of inheritance

When Israeli Assets Pass Through a Trust

Some Israeli families use trusts (Hebrew: "ne'emanut") for estate planning. If you're a beneficiary of an Israeli trust, the analysis changes substantially.

What Constitutes an Israeli Trust for US Purposes

The IRS test for whether something is a "trust" is functional, not labeled. Many Israeli arrangements that aren't called trusts in Hebrew are still trusts for US purposes (and vice versa). Examples:

• "Hekdesh" — Israeli charitable trust, treated as foreign trust for US purposes
• Israeli private trusts established under Israeli Trust Law
• Foreign-jurisdiction trusts (Jersey, Cayman, Panama) with Israeli connections — treated as foreign trusts
• Some "ne'emanut" arrangements that are really nominee/escrow setups — may not be trusts

Form 3520 Distributions From Foreign Trusts

If you receive a distribution from a foreign trust — at any dollar amount — Form 3520 reporting applies. There's no $100K threshold for trust distributions.

Form 3520-A — The Trust Side

A foreign trust with US owners or US beneficiaries may be required to file Form 3520-A annually. If the foreign trust doesn't file, the US owner/beneficiary must file a "substitute" Form 3520-A or face penalties.

The Throwback Rules

If a foreign trust has accumulated income over many years and then makes a distribution, the IRS uses "throwback rules" to tax the distribution as if it had been distributed each year — with interest charges. This can result in effective tax rates exceeding 100% of the distribution in extreme cases.

This is one of the most punitive areas of US tax law, and it's specifically designed to deter use of foreign trusts to defer US tax. If you're a beneficiary of an accumulating Israeli trust, careful planning is essential.

Default Method vs Actual Method

Reporting trust distributions has two methods:

• Default method — used when full trust accounting isn't available. Generally treats distributions as throwback distributions (worst case)
• Actual method — used when complete trust accounting is provided. Allocates distributions to specific years, applies appropriate tax

Coordinating with the Israeli trustee (or substitute trustee) to obtain proper trust accounting is critical. See our Trustee Services page for our coordination work in these situations.

Your First 30 / 90 / 180 Days

Time matters. Here's a practical playbook for the period immediately after learning you've inherited Israeli assets.

First 30 Days

• Don't rush to "claim" anything from Israel — wait until you have proper advice
• Identify the universe of assets — bank accounts, real estate, kupot, business interests, trusts, life insurance, jewelry, vehicles
• Get the Israeli death certificate (Te'udat Ptira) — usually issued by Misrad HaPnim within days
• Engage an Israeli estate attorney — preferably one who works regularly with foreign heirs
• Engage a US-Israel CPA — preferably one with cross-border experience (this is what we do)
• Begin the apostille process for required US documents — passport, address verification, notarized declarations
• Inform your existing US CPA — they may not know about Form 3520. Don't assume.

Days 30–90

• File application for Tzav Kiyum Yerusha or Tzav Kiyum Tzava'a with the Registrar of Inheritance
• Get fair market valuations for inherited real estate (date of death) — needed for both US step-up basis and potential 706-NA filing if applicable
• Get fair market valuations for any inherited business interests
• Notify Israeli banks of the death and obtain account statements
• Identify any kupot gemel/keren hishtalmut — may require contacting "Har Habaytuach" (centralized search of Israeli pension/savings) or directly with major institutions
• Identify potential trust involvement and request trust documents from any Israeli trustees

Days 90–180

• Receive Tzav Kiyum (typically issued in this window for uncontested cases)
• Begin Tabu transfers for real estate
• Begin bank account transfers — open Israeli account if planning to keep, or arrange wire transfer abroad
• Liquidate or transfer brokerage holdings with attention to PFIC issues
• Plan Form 3520 filing — gather all asset valuations, donor information, dates
• If you're behind on FBAR or 8938 from prior years, plan SFOP — Streamlined is often optimal alongside fresh inheritance reporting
• Begin US tax planning for next year's return — the inheritance is reportable on the year-of-receipt 1040
• Make decisions about ongoing Israeli holdings — sell vs hold, rent vs occupy, etc.

Three Worked Examples

The Most Common Mistakes

1. Not Filing Form 3520 Because "There's No Tax Due"

The penalty for not filing Form 3520 is 5% per month, capped at 25%. On any inheritance above $100K, this is the most expensive mistake to make. Form 3520 is informational only — file it.

2. Conflating Israeli Inheritance Tax with US Tax Treatment

Yes, Israel has no inheritance tax. No, that doesn't mean the US doesn't care. The US has Form 3520, ongoing income tax on post-inheritance income, basis tracking, and (for trusts) throwback rules. Israeli law and US law operate independently.

3. Underestimating the Israeli Probate Timeline

Foreign heirs routinely expect 1–3 month timelines. Realistic timelines are 4–9 months for uncontested cases, longer with apostille and translation issues. Plan accordingly.

4. Failing to Apostille US Documents

Notarized documents from the US must be apostilled before Israeli authorities accept them. Each US state has its own process. Order apostilles early.

5. Selling Israeli Real Estate Without Tax Planning

If you sell Israeli real estate quickly, you trigger full Israeli capital gains tax on the lifetime appreciation (no step-up under Israeli law). Sometimes the right answer; sometimes you should hold.

6. Ignoring PFICs in Inherited Brokerage Accounts

Inherited Israeli mutual funds and ETFs are typically PFICs for US purposes. Selling triggers complex calculations under the IRS PFIC regime. Many heirs benefit from quick liquidation, but coordinate with a CPA familiar with PFIC rules first.

7. Mishandling Inherited Kupot Gemel

Kupot gemel may be foreign trusts for US purposes. Form 3520-A reporting may apply. Rolling, withdrawing, or holding the inherited kupa each have different US consequences. Don't autopilot this decision.

8. Not Considering the Israeli Resident Director Requirement

Inherited Israeli operating companies need a Israeli resident on the board (in most practical situations). Without one, the company faces Israeli tax residency and banking issues. See our Director Services page.

9. Failing to Coordinate Two Sets of Advisors

The Israeli estate attorney and the US CPA need to work together — same valuations, consistent treatment, coordinated timing of filings. Heirs who use disconnected advisors end up with conflicting positions and potential audit exposure.

10. Waiting Too Long to Get Advice

The first 90 days set the trajectory for the entire inheritance. Decisions made in this window — about valuations, about which assets to liquidate, about Form 3520 timing — affect the next 5–10 years of compliance. Get advice early.

Frequently Asked Questions

Does Israel have an inheritance tax?

No. Israel abolished its inheritance tax in 1981. There's no Israeli estate tax or gift tax in the traditional sense. However, capital gains on inherited property are taxed at sale (without step-up in basis) under Mas Shevach.

Do I owe US estate tax on Israeli assets I inherit?

Generally no — US estate tax is paid by the estate, not the heir, and only applies to US-situs assets of non-US decedents (or worldwide assets of US-citizen decedents with estates above the federal exemption). Most Americans inheriting from non-US-citizen Israeli relatives don't trigger US estate tax. But Form 3520 is still required.

What if my Israeli relative was also a US person?

The estate's executor handles US tax filings (final 1040, Form 706 if estate exceeds exemption, fiduciary returns). As heir, you still file Form 3520 for inheritances received from the estate. You may also inherit assets that the deceased hadn't properly reported during life — get advice on cleanup.

Can I disclaim an inheritance to avoid US compliance?

Disclaimer is possible but must be made within strict timeframes (typically 9 months under US rules, similar under Israeli law). Disclaimer means the asset passes to the next-in-line heir. Strategic disclaimer can be useful in some scenarios but is irrevocable — get advice.

What about inheritance from a step-relative or unmarried partner?

Form 3520 applies to gifts/inheritances from any non-US individual, regardless of relationship. The $100K threshold is the same.

Do I file Form 3520 in the year I receive the assets, or when probate is finalized?

Generally, Form 3520 is filed for the year you actually received (took control of) the assets. If probate runs over multiple years and you receive assets in stages, you may have multi-year Form 3520 reporting. Coordinate with your CPA.

Can my Israeli attorney handle the US side too?

Generally no. Israeli attorneys typically don't have US tax authority. You need a separate US tax advisor (US CPA or US-Israel-coordinated CPA like our firm). The two work together but have different roles.

I'm planning to make Aliyah after inheriting. Does that change anything?

Yes, significantly. Once you become Israeli resident, your treatment of foreign-source income changes (10-year exemption may apply). For Israeli-situs inherited assets, you may unlock additional planning options. See our Aliyah Tax Checklist.

What if the Israeli decedent had assets in a third country (e.g., a Swiss bank account)?

Adds another layer. Swiss banks have their own probate procedures. You may need a Swiss probate order in addition to the Israeli one. US Form 3520 captures all of it as inheritance, regardless of where situated.

What does engaging Cohen Partners look like for inheritance situations?

We typically work alongside your existing US CPA (or as the US-Israel coordinator if you don't have one), and alongside your Israeli estate attorney. Our scope:

• Identify and value inherited assets for US purposes
• Prepare Form 3520 (and 3520-A if applicable)
• Coordinate Israeli and US tax positions (FTC, basis, valuations)
• Advise on hold-vs-sell decisions for inherited real estate, businesses, securities
• Plan ongoing reporting for inherited accounts (FBAR, 8938, 5471)
• Address any prior-year compliance issues of the deceased that affect the heir

The Bottom Line

Inheriting Israeli assets as an American is one of those situations where the wrong move in the first 90 days creates problems that take years to fix. The good news: with proper planning, almost every inheritance situation can be navigated cleanly — and many situations end up tax-efficient overall thanks to the US step-up in basis.

The right approach:

1. File Form 3520 — this is non-negotiable for any inheritance over $100K
2. Get fair market valuations early — needed for both US step-up basis and Israeli filings
3. Coordinate Israeli and US advisors — they need to work together
4. Don't autopilot kupot, brokerage, or business interests — each requires specific analysis
5. Plan the ongoing compliance — Form 5471, FBAR, 8938 are all in play
6. Consider hold-vs-sell decisions carefully — Israeli no-step-up changes the math

If you've recently inherited (or expect to soon inherit) Israeli assets, contact us for a free 30-minute consultation. We'll map out the specific issues in your situation and recommend the right path forward — whether that's full engagement with us, coordination with your existing advisors, or a one-time review to make sure nothing's being missed.