Important developments for US citizens living in Israel - opinion

By ADV. OSHER FELICIA HALELI

AUGUST 22, 2024 14:39

Adv. Osher Felicia Haleli, a Partner in the law firm Shibolet & Co. (photo credit: Oren Dei) — Adv. Osher Felicia Haleli, a Partner in the law firm Shibolet & Co.

(photo credit: Oren Dei)

The US and Israel have instituted new legislation on the topics of investments, taxes, and real estate.

One of the challenges we face in a world that is so fast-paced is keeping up with change. Ignorance of changes in the law and the financial world relevant to being a US citizen residing outside the US, can prove quite costly. This article will cover important information for US citizens residing in Israel, as part of the never-ending journey to remain informed.

This article was borne out of my personal experiences with scores of US citizens residing in Israel. I cringe each time I know that had the family implemented estate and tax planning before death or incompetency, the family would have saved huge amounts in taxes and fees to professionals.

Powers of attorney do not cross borders. Make sure you have a power of attorney in place in case you are found unable to make financial (or medical decisions) – in each country where you own assets, accounts, etc. To avoid guardianship, you will want to sign enduring or durable powers of attorney while you are competent (do not wait too long!).

Having your US trust own Israeli assets/accounts/investments will prove extremely difficult because the Israeli system is not built for ownership by trusts. Do not assume that your US estate plan will work well with your Israeli assets/accounts/investments or vice versa. Your Israeli Will must be ready to govern your US assets, accounts, etc., if you plan for it to do so. Make sure to consult with both a US and an Israeli estate planning professional.

A Transfer Certificate will be required to transfer your accounts at a US financial institution to your heirs, even if the heirs are joint owners of the account and even if the heir is the surviving spouse.

New olim from North America with Rabbi Yehoshua Fass, Co-Founder and Executive Director of Nefesh B’Nefesh and Aliyah and Integration Minister Pnina Tamano-Shata. (credit: SHAHAR AZRAN)

Your Israeli Will can make sure your loved ones inherit from you what you own in the US. Your Israeli Will must be ready to govern your US assets, etc. An account at a US financial institution owned by a non-US resident will be frozen until the Transfer Certificate is obtained. It currently takes about two years from the date of death to receive the Transfer Certificate. There are ways to work around this and ensure continued access. Work with your US estate planning professional to help you plan for or around Transfer.

If some of your heirs reside in different countries, such as some children in the US and some Israel, there are complex income tax issues to consider. Your US and Israeli accountants will need to work with your estate planning professionals as a team to implement the best plan for your family.

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Investments

Investment in certain non-US mutual fund types can incur additional US income tax for a US citizen. Your investment professional might not have enough familiarity with US citizen limitations and tax and vice versa. US advisors might not have knowledge of Israeli tax issues. Always run any new investment by your US and Israeli accountants before investing.

The US instituted a new registry for all US companies, including LLCs, S Corporations, and other types of companies.

If you own more than a certain percentage of the total shares or can make controlling decisions for the company, you must report your ownership of this company by December 31, 2024, to avoid facing penalties. So consult your US tax professional about this registry today.

Adv. Osher Felicia Haleli is a Partner in the law firm Shibolet & Co practicing US-International Estate Planning Law and Probate since 1996. She can advise as to any of the issues in this article.