Israel: An Overview
A Growing Market: Why Israelis Are Turning to Trusts – and What Changes in 2026
Over the past decade, trusts have moved from the margins to the mainstream of wealth and succession planning for Israeli families. Rising domestic wealth, the globalisation of Israeli business, high net worth new immigrants and returning residents, and a growing appreciation of the limits of Israeli succession law have created strong demand for properly structured trusts. Families want continuity, control across generations, protection of the family business, and certainty as to who ultimately benefits from what they have built. A trust – a mature common-law institution – can answer those needs in a way Israeli domestic tools often cannot.
No fit-for-purpose trust law
There is, however, a paradox at the heart of this market. Israel does not have a trust law fit for serious estate and asset-protection planning, nor a regulatory framework governing trustee services. The Trust Law 1979 is thin, dated, and was not designed for sophisticated multi-generational structures. In practice, Israeli law engages with trusts mainly through the tax provisions of the Income Tax Ordinance rather than through a developed body of private trust law. There is limited case law, no equivalent of the firewall and asset-protection provisions found in leading trust jurisdictions, and no licensing or prudential regime for professional trustees. Anyone can hold themselves out as a trustee. For a structure whose value depends on the integrity and permanence of the trustee relationship, that is a serious gap.
Regulated foreign trustee under a superior law
For these reasons, we do not recommend forming trusts under Israeli law or appointing an unregulated Israeli trustee. Instead, we recommend using a professional regulated foreign trust company as trustee and a superior foreign law as the governing law. For example, our in-house trustee, Alphen Trust Company AG, is licensed and supervised by FINMA, the Swiss financial-market regulator, which is the same regulator for Swiss banks. Swiss regulation provides what Israeli law lacks: professional licensing, fiduciary supervision, anti-money laundering controls, and genuine accountability to a serious regulator.
Many foreign jurisdictions, which are the most advanced and settled trust jurisdictions in the world, have modernised their trust laws integrating innovations to combine strong asset protection with flexibility and settlor control. This preserves robust firewall provisions against foreign forced-heirship and matrimonial claims but permits a settlor to reserve powers without invalidating the trust. They also allow for a family business to be held in trust while preserving the family’s day-to-day operational control. The optimal governing law jurisdiction will be determined together with the clients based on their specific needs and requirements.
Using a foreign trustee and foreign governing law does not place the structure outside the Israeli tax net or beyond the reach of the Israel Tax Authority. On the contrary, trusts are fully recognised for Israeli tax and reporting purposes. Where the trust has an Israeli settlor or Israeli beneficiaries, it remains fully within the Israeli tax and reporting system, and the obligations of the settlor, trustee and beneficiaries towards the Israel Tax Authority (ITA) are met in the ordinary way. This is not offshore secrecy; it is a compliant, transparent arrangement governed by better trust law and administered by a better-regulated trustee, while remaining fully recognised and reported for Israeli tax purposes.
Trust holding company
It is common to interpose an underlying trust holding company – which can be Israeli or foreign – beneath the trust, so that investments, bank accounts and business interests are held by a company whose shares are owned by the trust. This is standard practice: it simplifies administration, ring-fences liabilities, and makes it easier to move, pledge or reorganise assets without disturbing the trust itself.
A correctly structured and reported trust holding company should be transparent for Israeli tax purposes – that is, looked through, so that the trust’s own tax and reporting treatment applies to the underlying assets rather than the company being treated as a separate opaque foreign entity.
Israeli tax treatment on creation
As a general rule, a lifetime transfer of assets by an individual into a trust is not a taxable event in Israel. Israel has no gift or estate tax and – putting real estate aside – assets can generally be settled into trust during the settlor’s lifetime without an Israeli tax charge. This allows family wealth to be consolidated within the structure while the settlor is alive.
Israeli real estate is the important exception. Transferring Israeli real estate into a trust engages the Land Taxation regime – potentially both land-appreciation tax and purchase tax – and the treatment is complex and fact-specific. It should never be assumed that the general “no tax on settlement” rule applies. Specific advice is essential before any transfer is made.
The case against leaving succession to Israeli law
The argument for a trust becomes clearest when set against the alternative: leaving succession to Israeli law. The following are three major problems, although they are by no means the only ones.
First, intestacy. Where there is no effective will, the Succession Law 1965 distributes an estate according to fixed statutory shares between spouse and children. Those shares rarely match the deceased’s intentions and do not account for a family business, a second marriage, minor children, or beneficiaries not yet ready to manage sudden wealth.
Second, the fragility of prenuptial and marital-property arrangements on death. Couples often assume that a prenuptial agreement will govern what happens to their assets. On death, however, the surviving spouse’s statutory succession rights and community-property presumptions can cut across the intended distribution. A trust, by contrast, holds assets outside the estate and outside the matrimonial pool, so the settlor’s intentions are less exposed to the interaction of succession and family law.
Third, business and partnership splits. When shares in a family company or a partnership interest pass by succession, ownership can fragment among heirs. Decision-making may be paralysed, control can drift to in-laws, disengaged relatives or outside parties, and shareholder or partnership agreements may force a sale at the wrong time. Holding the business through a trust keeps ownership consolidated in a single, permanent hand – the trustee – with governance arrangements that allow the family to run the enterprise without the estate being carved up on each death.
Underlying all of this is one powerful advantage: a trust can preserve the bloodline. Assets can be kept within the family line across generations, protected from divorcing spouses, beneficiary creditors and succession-driven dilution, and passed down according to the settlor’s wishes rather than a statutory formula.
The 2026 reporting change
Anyone planning around these structures must now factor in an important development. Under Amendment No 272 to the Income Tax Ordinance, enacted in April 2024 and effective from 1 January 2026, the long-standing reporting exemption for new immigrants and veteran returning residents has been abolished. The ten-year exemption from Israeli tax on foreign-source income survives, but the parallel exemption from reporting is gone. Anyone who becomes an Israeli tax resident on or after 1 January 2026 must file annual returns disclosing worldwide income and foreign assets, including interests in foreign trusts, even where no Israeli tax is due.
Trusts therefore remain the most effective tool available to Israeli families for succession, control and bloodline preservation – but from 2026 they must be built and operated on the assumption of full transparency to the ITA.