Inherited Apartment in Israel: Transferring Rental Income to France

To transfer rent from an inherited apartment in Israel to the United States, you must first open a personal bank account in Israel, as the deceased’s account is frozen. Next, you amend the lease agreement to include your new account number. Finally, you execute international wire transfers to your U.S. bank while complying with tax reporting obligations to the reshut ha-misim.

The deceased’s bank account and the suspension of transfers

• The fundamental difference from the U.S.: In Israel, the deceased’s joint or individual account is frozen immediately by the bank until a tsav yerusha (succession order) or specific court authorization is presented. There is no automatic « estate account » opened by the bank to collect rent.
• The immediate risk: If the tenant continues to make transfers to the frozen account, those transactions are rejected or blocked. The heir-landlord cannot use this account to pay electricity or phone bills, which can lead to service interruptions at the property.
• The emergency procedure: Even before obtaining the tsav yerusha, the heir must visit the bank branch with their teoudat zeout (ID card) and the death certificate to request a partial unfreezing or the opening of a temporary account dedicated to property management, if the bank permits it. Otherwise, a new personal account must be opened quickly.

In practice, this period of blockage is the primary source of conflict. The tenant, accustomed to paying the historical landlord’s account, may believe that a rejected transfer exempts them from their obligation. They are not. The rental debt persists regardless of technical payment difficulties. We regularly observe heirs neglecting this step, assuming that time works in their favor. However, each month without collection is a month of lost cash flow and potential debts on vaad bayit (condominium fees) that continue to accrue. If you cannot travel to Israel, you can grant power of attorney to a local agent to handle these banking procedures, but the bank will require legalized and translated documents.

The tsav yerusha: the key to acting without delay

• The tsav yerusha is not a simple administrative document; it is the legal instrument that proves to the family court and financial institutions who has the right to dispose of the deceased’s assets. Without it, no bank will credit rent to an account in the heir’s name if the property has not yet been transferred to the tabou (land registry).
• The processing time: The family court (often in Tel Aviv or Haifa, depending on the deceased’s residence) takes several months to issue this document. During this time, rent continues to accrue. The heir must anticipate this « limbo » period where they are the de facto owner but not yet the de jure owner.
• The distinction from the U.S.: Unlike in the United States, where an estate can manage current income with notarized powers of attorney, in Israel, the management of bank and real estate assets is strictly blocked by institutions until the court rules. The heir cannot simply sign a check in the deceased’s name.

This legal distinction is fundamental for a U.S. owner. In the United States, the possession of current income is often facilitated by temporary notarized powers. In Israel, the separation between legal ownership and operational management is strict. The tsav yerusha is issued by the competent family court. If the deceased resided in Netanya, the Tel Aviv regional court has jurisdiction. The document must be translated into English if you wish to use it for procedures in the U.S., but for Israeli banks, the original Hebrew version is sufficient. We recommend regularly checking the status of the file with the court clerk, as timelines vary based on the complexity of the estate (number of heirs, existence of a tzava’a or will).

Opening an account in the heir’s name: banking requirements

• Required documentation: To open a personal checking account capable of collecting rent, the heir residing in the U.S. must provide their passport, proof of U.S. residence, and often a certificate of residence issued by the Israeli embassy or consulate in the U.S. Israeli banks are very strict about verifying the identity of foreign residents.
• The tax residency issue: The bank will require you to declare your tax residency. If the heir lives in the U.S., they must indicate that they are a U.S. tax resident. This does not prevent account creation, but it activates tax reporting obligations to the Israeli tax authority (reshut ha-misim).
• Bank selection: Prefer a major bank (Hapoalim, Mizrahi, Leumi) that has branches capable of handling non-resident files or dedicated services. Small cooperative banks are often less flexible for expatriate owners.

Opening the account is the longest step if you are remote. Israeli banks apply strict compliance rules (KYC). You will need to provide proof of U.S. tax residency. The bank will check if you already have accounts in Israel. If this is your first account, the process can take several weeks. Once the account is open, you receive an account number and a SWIFT code. This is the number you will provide to the tenant. Note that account maintenance fees and international wire fees are at your expense. We advise choosing a bank with robust online services, as you will need to manage rejected transfers and follow-ups remotely.

Amending the lease agreement: the issue of the shtar ‘hov

• The invalidity of the signature: The current lease is signed by the deceased. The payment clauses designate their account. Legally, the tenant can no longer be required to pay an account that no longer exists or is frozen. You must establish a lease amendment or a new contract that designates the heir’s new account number.
• The role of the shtar ‘hov: If the tenant signed a shtar ‘hov (promissory note) guaranteed by an arev (guarantor), this document remains valid, but the payment order must be updated. The tenant cannot hide behind the fact that the account changed to refuse payment. They must simply pay into the new account.
• Pressure on the tenant: If the tenant refuses to pay the new account, the heir must send an official demand letter. In Israel, the tenant-landlord relationship is rigid. A non-paying tenant can be pursued quickly.

The shtar ‘hov is a powerful tool in Israel. Unlike a simple check, it is an enforceable instrument. If the tenant does not pay, you can seize the arev (guarantor) directly without going through a long trial. However, the shtar ‘hov does not change the destination of the payment. You must notify the tenant of the change in banking details in writing. This notification must be dated and signed. In case of a dispute regarding the effective date of the new account, written proof is decisive. If the tenant contests the heir’s legitimacy, you will need to produce the tsav yerusha. We often see tenants try to negotiate a rent reduction by invoking the change of ownership. This is a classic maneuver. The rent remains unchanged unless there is a contrary written agreement.

Managing fees and local taxes on the inherited property

• vaad bayit (condominium fees): These fees continue to accrue on the property, even if the transfer to the tabou is not complete. The building manager recognizes only the last owner registered in the land registry. If the deceased is still registered, the manager will send invoices to them. You must contact the manager to update the contact details and request that invoices be redirected to you.
• The arnona (municipal tax): This tax is paid to the Netanya municipality. It is indexed to the cost-of-living index. Payment is generally made via automatic debit from the owner’s bank account. If the deceased’s account is frozen, the debit fails. You must contact the municipality to change the debit account. Remember to check for arnona debts before taking over payment, as arrears are your responsibility as the heir.
• Taxes on rent: Rent received in Israel is taxable. As a U.S. tax resident, you must declare this income in the U.S., but you must also check if you are subject to Israeli tax on foreign income. The reshut ha-misim may require the declaration of rental income if the property is in Israel. Double taxation is avoided by the U.S.-Israel tax treaty, but the formalities remain heavy.

Managing fees is a frequent point of friction. Israeli building managers are often unresponsive to requests to change contact details. You must insist and provide proof of your status as heir. For the arnona, the Netanya municipality is more centralized. You can perform procedures online via the municipal portal, but your name must first be registered as the owner. Until the tabou is updated, you are in a gray area. We recommend paying current fees from your own account to avoid late penalties, then recovering the amounts during the settlement of the estate.

Transferring funds to the U.S.: wires and exchange

• International wire transfer: Once rent is collected in your Israeli account, you can execute a SWIFT transfer to your U.S. bank. The delay is 2 to 5 business days. The Israeli bank will apply wire fees and an exchange margin. The exchange rate is that of the transaction day.
• Currency conversion: You receive shekels (NIS) and want U.S. dollars (USD). The bank converts automatically. You can also request a transfer in shekels if your U.S. bank accepts multi-currency accounts, but this is rare. Most U.S. banks convert to dollars upon receipt.
• Declaration of capital movements: In the U.S., you must report capital movements exceeding a certain threshold on the appropriate tax forms. In Israel, the bank reports international transfers to the reshut ha-misim. Ensure that the amounts correspond to the rent collected to avoid any tax audit.

Transferring funds is the final step, but it poses the most tax problems. The Israeli bank will ask for the nature of the funds. You must indicate « rent » or « rental income. » Never indicate « gift » or « investment. » If the amounts are high, the bank may request justification. The exchange rate is set by the bank, which adds a margin. To minimize fees, execute less frequent but larger transfers. In the U.S., the bank will credit you in dollars. You must then declare this income in your U.S. tax return. The tax treaty allows for a credit for tax paid in Israel, but there is no tax on rent in Israel for non-residents in certain cases. Verify your specific situation with a tax advisor.

Pitfalls to avoid and common errors

• Ignoring the tsav yerusha: Some heirs think they can manage the property without waiting for the succession order. This is a mistake. Without this document, you have no legal power to encumber the property or collect rent in the name of the estate. You are in an irregular situation.
• Failing to update the lease: Leaving the lease in the deceased’s name is a fault. In case of dispute, the tenant can contest the heir’s legitimacy. An updated lease, signed by the heir and the tenant, is the best proof of your right to collect.
• Forgetting the tax declaration: Failing to declare rent in Israel and the U.S. is fraud. The reshut ha-misim exchanges information with the U.S. IRS. Cross-checks are increasingly frequent. Non-declaration leads to heavy penalties and late interest.

The most costly errors are those related to administrative negligence. Many English-speaking owners manage their property remotely without understanding the rigidity of the Israeli system. They think that geographic proximity or a relationship of trust is sufficient. It is not. Israeli law is formal. Everything must be written, signed, and registered. We recommend entrusting daily management to a professional. Our property management in Netanya handles these technical aspects, including lease amendments and fee tracking. For owners who manage themselves, it is crucial to follow a lease renewal guide adapted to the local context, even if your property is not in Asdod, because the principles are the same.

The role of the professional and remote management

• The local agent: If you cannot travel to Israel, you must designate an agent. This can be a lawyer, a notary, or a management company. The agent acts in your name based on a power of attorney. The power of attorney must be specific: it must authorize the agent to collect rent, pay fees, and encumber the property for repairs.
• The management company: A rental management company like GII can ensure complete management. It collects rent into its own account or a dedicated account, deducts its fees, and remits the net to you. This solution is the simplest for an owner residing in the U.S. It avoids back-and-forth banking and administrative complications.
• Tracking repairs: The tenant may request repairs. The owner must respond within a reasonable time. If the owner does not respond, the tenant can sometimes deduct the costs from their rent, but this is risky for them. A professional manages these requests and engages a professional for a bedek bayit (building inspection) if necessary, to document the condition of the premises and justify the repairs.

Remote management is possible, but it requires a solid infrastructure. A simple family agent may not have the skills to manage rental disputes or tax obligations. A professional management company has the resources to interact with banks, municipalities, and courts. It knows the specifics of Netanya and coastal cities. It can also manage leasing in case of vacancy. The cost of management is an investment that protects your assets. We advise comparing offers and verifying the company’s reputation. Transparency on fees and monthly reports is essential.