Non-Israelis leave billions of shekels in inheritances. But conflicting laws may award the funds to unexpected heirs.
It is not common knowledge that non-Israelis own around 5% of all Israeli real estate, billions of shekels worth of property. This wealth and spread of assets bring with it its own set of problems, particularly from the legal aspect. The most significant cross-border problem involves the intergenerational transfer of property, or simply: inheritance.
Which law applies if an American leaves assets in Israel to his family? Is it Israeli law? Or does the law of his place of residence apply?
A common example is that of an American citizen, resident of New York, who leaves an apartment in Israel in his will. He makes this will in the proper fashion, with a lawyer, during a holiday trip to Israel, and he writes in this document that his wife gets absolutely nothing from this estate. The clause excluding the wife is unambiguous.
Is such a clause valid? Israeli law, basing itself on Common Law, and to a lesser degree on Jewish law, essentially gives people the freedom to dispose of their assets in any way they wish. One of the callers on our radio program dealing with inheritance said that she wanted to exclude her son and leave everything to the “Dogs’ Home In Beit Dagan.” Clearly, this was meant to be an expression of her intense displeasure with her offspring (who was probably listening in), and the question that she asked was, would this will be binding? The answer to this question, under Israeli law, is an unequivocal “yes!”
Israeli law allows the exclusion of family members from inheritances, including wife and children. And as the American’s will relates to Israeli assets and is probated in the Israeli courts, so the “freedom to bequeath” principle would apply. On the face of it, the wife does not have a chance to contest it.
But nothing in the law is as simple as it looks, and there is good news for the rejected wife. Section 137 of the Israeli Inheritance Act states that the Israeli Courts apply foreign law to an estate of a deceased who resides abroad at the time of his death. The law applied is that of his country of domicile when he died. In this case, the deceased husband was a resident of New York so Israeli Court will apply New York law, and not the law of the State of Israel. To be clear: the will is probated in an Israeli court but its validity will be considered under the law in New York.
New York law clearly states that you cannot exclude a spouse from your will.
A legal argument will no doubt ensue on whether New York was the deceased’s place of domicile. There are other US states which do not have this rule, and there will no doubt be an attempt to show that he was resident in another state. However, domicile is clearly defined in Israeli law as “the place where his life was centered.” And the court takes into consideration where were the person’s home, business, friends, and family, in order to determine where was the center of the deceased’s life.
In a similar case, a Tel Aviv court decided that the husband’s place of residence was indeed New York and after applying New York law, the wife received around a third of the Israeli inheritance. The offending clause excluding her was invalid, and she inherits despite the deceased’s express wishes.
Surprisingly, applying international law and utilizing the Israeli courts can actually achieve the goal of a testator whose will, if it is probated in his place of residence, would be disallowed if the deceased left his estate to an heir who is not recognized by his local law.
A case in point is that of a French citizen who wishes to exclude his wife or his children, any or all of them, from his will. That would be no problem in Israel, as a person has a quasi-constitutional right to dispose of his assets in any way he wishes. But in France this will not wash. French law does not allow you to exclude your wife and your children, however annoying and irritating they have been to you.
But a little-known European Law that came into force in 2015 allows you, if you have dual citizenship – say one French and one Israeli – to leave your assets in accordance with the law of your citizenship, and you can choose which of your citizenships applies. So if the French citizen acquires Israeli nationality, he then would be permitted to state in his will that his estate should be distributed in accordance with Israeli law, even though he does not live in Israel but is domiciled in France.
So unlike French citizens who do not have dual citizenship, he can leave his assets in his will to whomever he pleases in accordance with Israel law. The French prohibition on excluding your annoying relatives will not apply, and the Israeli freedom to dispose of as desired will pave the way to achieving the deceased’s real wishes.
The above article is obviously simplified, and advice must be taken on every case separately, but the correct application of seemingly conflicting international laws can bring about some surprising results.
Dr. Haim Katz and Adv. Sam Katz are senior partners in a law firm based in Tel Aviv and Jerusalem. Their new book in English, The Complete Guide to Wills and Inheritance in Israel, is published by Israel Legal Publications. office@drkatzlaw.com