Bequeathing an Apartment in a Will — Why Does It Require Professional Legal Guidance?

Bequeathing a property such as an apartment is not a trivial matter. When dealing with an apartment, complex legal and tax questions arise that require a deep understanding of the law. Capital gains tax on an apartment in inheritance, inheritance tax on an apartment in Israel, and other governmental requirements can significantly affect the inheritance itself and the heirs' financial future.

In recent times, numerous cases demonstrate that families who did not receive appropriate legal advice have encountered unexpected complications — disputes between siblings, incorrect tax calculations, or even loss of legal rights. The law office of David Vasserman in Modiin assists families in Israel in transferring assets in a thoughtful, focused, and lawful manner.

This section guides you through every step: from will planning, through inheritance procedures, to fulfilling tax obligations such as calculating inheritance capital gains tax and proper reporting to the Israel Tax Authority. Everything to ensure you can bequeath the apartment peacefully and with legal confidence.

What Are the Main Steps in Bequeathing an Apartment?

• Will Planning: Drafting a clear, legally valid, and comprehensive will that details your intentions regarding the apartment.
• Will Registration: Submission to a court or use of authorized will registration services.
• Will Probate Process: Following the testator's death, the validity of the will must be proven before a court.
• Calculating Capital Gains Tax on an Apartment in Inheritance: Determining the apartment's value at the time of death and calculating the applicable tax.
• Tax Reporting and Inheritance Tax Calculation: Completing tax forms and performing required calculations.
• Property Transfer: Legal transfer of the apartment to heirs by force of law or by agreement.

Each step requires legal precision and up-to-date knowledge of the law. Experienced attorneys can ensure that you meet all requirements and protect your rights.

Capital Gains Tax on an Apartment Received by Inheritance — How Does It Work?

One of the most complex issues in inheriting an apartment is capital gains tax. Capital gains tax on an inherited apartment is calculated based on the difference between the apartment's value at the time of death and its value at the time of future sale. This is a tax imposed by the state on the profit generated from an increase in the property's value.

Section 49B(5) of the Land Tax Law precisely defines how capital gains tax is calculated in the context of inheritance. For an apartment received by inheritance, the property owner can enjoy substantial tax benefits in the tax calculation, provided the property is not sold immediately. When it comes to selling an inherited apartment between siblings or to a third party, capital gains tax must be calculated on the sale of an inherited apartment in accordance with the law.

The calculation includes the following steps:

• Determining the apartment's value at the time of death: This is the basis for calculating capital gains tax. This value is determined by a certified appraiser or according to official records.
• Determining the apartment's value at the time of sale: The price at which the apartment was actually sold or transferred.
• Deductions and additions: For repairs made to the apartment, improvements, or engineering expenses.
• Tax rate: Capital gains tax on a second apartment or additional apartment may be higher than on a primary residence.

A common issue is incorrect calculation of capital gains tax on the sale of an apartment received by inheritance. If heirs sell the apartment within a few years of the inheritance, they may face high tax liabilities. Experienced legal advice can help plan the sale in a manner that is tax-optimal.

Inheritance Tax on an Apartment in Israel — Does It Exist?

It is important to clarify: in Israel, there is no direct inheritance tax on assets inherited from parents. This means that the heir does not pay tax on the inheritance itself. However, if the inherited property is sold in the future, capital gains tax will apply. Additionally, if the apartment was subject to a mortgage or other debts, these transfer to the heirs.

Selling an Inherited Apartment Between Siblings — How to Handle It Legally?

Common situation: A parent bequeaths an apartment to several children. Now, some siblings want to sell the property, while others want to stay in it. This can be a delicate situation and requires careful legal management.

When it comes to selling an inherited apartment between siblings, several factors must be considered:

• Equal rights of each heir: Unless a will stipulates otherwise, each heir is entitled to an equal share of the property.
• Mutual consent: Sale of the property requires the consent of all heirs (or a legal solution if consent is not obtained).
• Capital gains tax on selling an inherited apartment: Tax calculation is performed for each heir separately, according to their share.
• Legal reporting: Updating the land registry, reporting to the Tax Authority, and distributing the proceeds among heirs.

In cases where one heir wishes to remain in the apartment and others want to sell, various legal approaches can be used:

• Purchase of share by one heir: One heir purchases the shares of the others, becoming the sole owner of the property.
• Sale to third parties: Sale of the property to a third party and division of the proceeds among heirs.
• Legal solution: If there is no agreement, a court may order a forced sale.

At the law office of Attorney David Serman, we assist families in reaching amicable agreements or conducting legal proceedings in a manner that preserves family relationships.

Calculating Capital Gains Tax on Inheritance — A Practical Example

Let's imagine a scenario: A father bequeaths an apartment valued at 1,500,000 shekels to two children. Ten years later, the apartment's value increases to 2,000,000 shekels, and one child sells his share (750,000 shekels).

Capital gains tax on the sale of an inherited apartment is calculated as follows:

• Tax base: 750,000 shekels (value at time of sale) minus 750,000 shekels (share in value at time of death) = 0 shekels gain.
• In this case, if there was no increase in the value of the individual share, the tax may be low or may not apply at all.
• However, if there was an improvement in the apartment or an increase in value, tax will apply to the difference.

This is only a simple example. In practice, calculating capital gains tax on an inherited apartment may be more complex, including consideration of expenses, improvements, and different rates for a second home or additional property.

One-Third of an Apartment in Inheritance — Rights and Obligations

A common situation is when an apartment is inherited by three heirs equally. Each heir receives one-third of the inherited apartment. This creates a situation in which all three have equal rights in the property, and any decision regarding use, repair, or sale requires coordination.

Rights of the heir:

• Right to use the apartment (for residence or rental).
• Right to receive a proportional share of the sale or rental proceeds.
• Right to influence decisions concerning the property.

Obligations of the heir:

• Payment of proportional share in property taxes, insurance, and maintenance costs.
• Cooperation with other heirs in significant decisions.
• Compliance with the law regarding use of the property.

Common problem: When one heir wants to sell his share, and the others do not agree. In this case, it is possible to use the right of first refusal (first purchase option) of the other heirs, or to appeal to the court if there is no agreement.