Inheritance Law · Real Estate — Adv. Liron Yitzhak Elmaliach
You Inherited Property — What Do You Do Now?
A complete guide to dividing inherited real estate among heirs: capital gains tax, Land Registry registration, selling versus keeping, and disputes. Adv. Liron Yitzhak Elmaliach — practicing since 2014.
⚠️ A Mistake That Can Cost Tens of Thousands of Shekels
Many heirs sell an inherited property without realising they are entitled to a capital gains tax exemption — and end up paying unnecessary tax. Before any sale or transaction involving an inherited property, seek legal advice.
What Happens to the Property After the Owner Dies?
A person's death does not automatically transfer ownership of their real estate to the heirs. A formal legal process is required, at the end of which the property is registered in the heirs' names.
- If there is a will — the property passes in accordance with the will, after obtaining a Probate Order from the Inheritance Registrar
- If there is no will — the property passes according to the Inheritance Law, after obtaining a Succession Order
- The property does not pass automatically — even when everything is clear, a legal process is required to formalise ownership
- Until the inheritance process is complete, the property is "frozen": it cannot be sold, mortgaged, registered, or transacted upon
Who Manages the Estate in the Interim Period?
Between the date of death and completion of the inheritance process, the estate is managed jointly by the heirs — or by an Estate Administratorappointed by the court when there is no agreement. If the property is rented out, rental income enters the estate and is distributed later.
Dividing an Apartment Among Heirs — The Options
When several heirs inherit a property jointly, they have several options — each with its own legal and financial implications:
Option 1: Sell and Divide the Proceeds
The simplest option. The apartment is sold on the open market and the proceeds are divided among the heirs according to their shares. Requires agreement of all heirs — or a court order.
Option 2: One Heir Buys Out the Others
An heir who wants to keep the property pays the other heirs the value of their respective shares. An internal partition — common and effective when one heir already lives in the property.
Option 3: Rent and Share the Income
All heirs remain co-owners; the property is rented and the income divided by share. Requires ongoing cooperation and can cause friction.
Option 4: Retain Joint Ownership
The most complicated option. Co-ownership of a property requires agreement on every decision — management, renovations, sale. Can lead to disputes lasting years.
What Happens When One Heir Refuses to Agree?
Forced partition (pirkuk shitatuf) — every co-owner of a property is entitled to demand a partition at any time. The court will order the property sold on the open market, unless one of the co-owners wishes to buy it at market value. A dissenting heir cannot prevent this.
Free Initial Consultation — Before You Decide What to Do with the Property
Capital Gains Tax on Inherited Property — What Exemptions Apply?
Capital gains tax is where many heirs make costly mistakes. It is important to distinguish between two stages:
The Inheritance Itself — Tax-Free
Israel abolished inheritance tax in the 1980s. The transfer of a property from the deceased to an heir does not attract tax — neither purchase tax nor capital gains tax.
Selling the Inherited Property — Subject to Capital Gains Tax
When heirs sell the property, the sale is ordinarily subject to capital gains tax — unless an exemption applies. The deceased's holding period is taken into account in the calculation.
Capital Gains Tax Exemptions When Selling an Inherited Property
- Sole residential property exemption — if the deceased had no other residential property, and the heir sells within 4 years of the date of death, an exemption may apply
- Linear calculation — the deceased's years of ownership proportionally reduce the applicable tax rate
- When multiple heirs sell together — each heir reports their share separately and is entitled to their own exemptions independently
⛔ Before Any Sale — Seek Advice Before Signing
A capital gains tax exemption that is not used before a contract is signed cannot be reclaimed. Heirs who sell without advice sometimes pay hundreds of thousands of shekels in unnecessary tax.
Registering Inherited Real Estate in the Land Registry — Step by Step
Obtain a Succession Order or Probate Order
File an application with the Inheritance Registrar. Attach the death certificate, identity documents, and if applicable — the original will. The order produces an official list of heirs and their respective shares.
Present the Order to the Israel Tax Authority
After receiving the order, file an application with the Tax Authority to obtain clearance for registration (confirming no purchase tax liability). Attach a self-assessment declaration.
File an Application for Land Registry Registration
With the Tax Authority clearance in hand, submit the order, clearance, and application forms to the Land Registry Office. The registration is carried out in the heirs' names according to their respective shares.
The Property Is Registered in the Heirs' Names
At the end of the process, the property is officially registered in the Land Registry in the heirs' names — and any transaction can proceed: sale, mortgage, or transfer.
⏱ How Long Does It Take? 6–18 Months from the Date of Death
A property not registered in your name in the Land Registry cannot be sold, mortgaged, or used as security for a loan. Registration is essential.
Free Initial Consultation — Before You Decide What to Do with the Property
An Heir Who Will Not Cooperate — What Can You Do?
One of the most common disputes in real estate inheritance is a co-heir who refuses to agree to a sale, a division, or the manner of management. The law provides several mechanisms to deal with this situation:
- Forced partition — any co-owner may apply to court for a partition order. The court will compel a sale, unless one co-owner is willing to buy the property at market value
- Appointment of an Estate Administrator — when heirs cannot agree, any heir can apply for the appointment of an Estate Administrator who will make decisions on a neutral basis
- Inheritance mediation — a faster and cheaper process than litigation. A neutral mediator helps the heirs reach an agreement without a protracted trial
- Dispute over property value — when heirs disagree on the property's value, the court appoints an agreed valuer whose determination is binding
- Heir living in the property who refuses to leave — the other heirs can sue for eviction and/or reasonable use-value rent for the period of unauthorised occupation
Inheriting a Property That Has a Mortgage
What happens when an inherited property is still encumbered by a mortgage? The heirs do not receive only the asset — they inherit the debt as well.
✓ The Bank Cannot Demand Immediate Repayment
Ordinarily, the borrower's death does not trigger an immediate repayment clause. Heirs can continue making mortgage payments on the existing schedule — subject to bank approval.
✓ Option: Sell and Repay the Mortgage
If the heirs sell the property, part of the proceeds pays off the remaining mortgage balance — and the rest is divided among the heirs.
✓ Mortgage Life Insurance
Some mortgages are covered by life insurance. If a policy exists, check who the beneficiary is and whether the policy covers the outstanding balance. Contact the insurer immediately.
✓ What If There Is No Money to Pay?
If heirs cannot make payments and there is no insurance, the bank may enforce the lien. A consensual sale with repayment of the debt is preferable to receivership proceedings.
Inheriting a Property That Has Sitting Tenants
When the inherited property is rented out, the heirs "step into the shoes of the landlord" — with all the rights and obligations that entails:
- The tenancy agreement continues — the landlord's death does not terminate the tenancy. Tenants continue to occupy the property, pay rent, and enjoy the usual statutory protections
- The agreement cannot be terminated immediately — heirs must honour the existing tenancy agreement, including its end date and the conditions for vacating
- The tenant's rights are not affected by the inheritance — tenants are not required to leave merely because ownership has changed. The Tenant Protection Law continues to apply
- Tenant who refuses to leave after the agreement expires — a statutory notice to vacate must be served; if the tenant does not leave, court proceedings are required. Self-help eviction is not permitted
- Management during the interim period — rent paid between the date of death and completion of the inheritance process enters the estate and is distributed among the heirs
Frequently Asked Questions — Inheriting Real Estate in Israel
Answers to the most common questions about inheriting property in Israel
Inherited a Property? Know Your Rights Before You Act
Free initial consultation — Adv. Liron Yitzhak Elmaliach, 33 HaShneim Asar, Pisgat Ze'ev, Jerusalem