Gifting an Israeli Apartment to Your Children
Gifting an Israeli Apartment to Your Children
Some American parents want to give an Israeli apartment to a son or daughter during their lifetime, perhaps because the child has made aliyah, is studying in Jerusalem or Tel Aviv, or simply to plan the family's future. Israeli law provides certain reliefs for gifts between close relatives, but the gift must be documented, reported and registered properly. In the United States, a gift of foreign real estate may raise gift tax reporting questions. Parents should also think carefully about control, since a completed gift is generally irrevocable. The notes below outline the key considerations in qualitative terms, to be discussed with Israeli and US advisors.
The Gift Deed
A gift of real estate in Israel is made through a written gift agreement, known as a shtar matana, followed by registration. Until registration, a gift of land can in some circumstances be withdrawn, but once registered it is generally final.
The deed should identify the property precisely, confirm that no consideration is paid and set out any conditions. Your Israeli lawyer will draft it and handle registration.
Israeli Tax Treatment in Broad Terms
Gifts between certain close relatives, such as parents and children, may be exempt from capital gains tax for the donor, subject to conditions. The recipient usually pays purchase tax at a reduced level compared with a regular purchase.
However, the recipient may face restrictions or less favorable treatment if he or she sells the apartment within a certain period after the gift. An Israeli tax advisor should explain these rules before the gift is made.
Reserving Rights for the Parents
Parents sometimes wish to give the apartment but keep the right to live in it or to receive rental income. Such arrangements are possible, for example through a registered right of residence or a usufruct agreement, but they may affect the tax position.
It is also possible to structure a gift with conditions, such as a requirement that the property remain in the family. Conditions must be drafted carefully to be enforceable.
Right of residence for the parents
Rental income arrangements
Conditions on future sale
Protection in case of the child's divorce
US Gift Tax Considerations
A US citizen or resident who gives property to a child may need to file a US gift tax return, depending on the value and on exclusions and lifetime exemptions that apply at the time. Actual tax is often not due, but reporting can be required.
The child's basis in the property for US purposes generally carries over from the parent, which differs from the treatment of inherited property. This can affect the tax on a later sale, so compare lifetime gifting with inheritance planning.
Family and Marital Considerations
Once the apartment is registered in the child's name, it becomes the child's asset and may be exposed to the child's creditors or, depending on circumstances, to claims in a divorce. Some parents ask their child to sign a prenuptial agreement or document that the apartment is a gift to them alone.
If there are several children, consider how the gift fits into overall fairness among them, and document your intentions in your wills.
Steps to Complete the Gift
Consult an Israeli lawyer and tax advisor and your US CPA. Sign the gift deed, report it to the Land Taxation office within the required period, pay any purchase tax due from the recipient and register the transfer at the Land Registry or the relevant authority.
Keep a complete file of the transaction, including valuations, for both Israeli and US purposes.
Frequently asked questions
Is gifting better than leaving the apartment in my will
Each route has advantages. Gifting provides certainty and may carry Israeli reliefs, while inheritance can offer a stepped-up US basis. Advisors in both countries should compare them for your family.
Can I cancel a gift after registration
Generally a registered gift is final, except in limited circumstances such as fraud or certain conditions set in the deed. Treat it as irrevocable.
Does my child need to live in Israel to receive the gift
No. A child living abroad can receive a gift of Israeli property, though residency may affect the tax treatment for the child now and on a future sale.
Can I gift only part of the apartment
Yes, a share of the property can be gifted, and the parents can keep the remaining share. This creates co-ownership, which should be documented.
Elkayam Group
At our Rival Street 37 office in Tel Aviv, colleagues speaking Hebrew, English and French help American parents understand the practical side of passing an apartment to their children.
Considering gifting an Israeli apartment to a child. Talk with our team about the questions to raise with your advisors.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv