Passing on wealth as an oleh: France vs Israel

For an oleh from

France, passing on wealth changes logic in Israel: Israeli law has no inheritance tax, whereas France generally applies its inheritance taxation as soon as there is a sufficient link with the deceased or the heir, wherever the assets are located. In this context, life insurance or death cover plays a particular role, both as a tool for immediate protection of the family and as an element to include in a broader wealth planning exercise.

A difference of principle between the two systems

Israel abolished inheritance tax in 1981: in practice, an heir, whether Israeli or foreign, pays no tax on assets received from an estate opened in Israel. France, by contrast, keeps an inheritance tax regime based on the family relationship and the value passed on, with rules that apply according to the tax residence of the deceased and, in some cases, that of the heir. This difference in philosophy explains why many olim wonder what actually becomes of their assets (property, savings, insurance contracts) once they have settled in Israel.

One point deserves to be clarified from the outset: the absence of inheritance tax in Israel does not automatically cancel a tax obligation that would exist elsewhere in France. If the deceased or the heir keeps a tax residence link with France, part of the estate may remain taxable on the French side, regardless of the treatment applied in Israel. This is a subject that depends closely on each person's situation (length of settlement, place of tax residence at the time of death, nature of the assets) and cannot be reduced to a simple rule.

A tax treaty between France and Israel

To limit situations of double taxation, France and Israel signed in 1995 a tax treaty specifically dedicated to inheritances and gifts. The aim of this type of treaty is generally to determine which country has priority to tax a given asset, and to provide mechanisms to prevent the same asset from being fully taxed twice. In the Franco-Israeli case, a mechanism frequently used by tax treaties is the tax credit: the heir's country of residence in principle grants a credit corresponding to the tax already paid in the other country.

This mechanism calls for an important caveat for olim: since Israel applies no inheritance tax, there is, by definition, no Israeli tax to claim as a credit against French tax. In other words, the absence of taxation in Israel does not necessarily reduce the tax due in France if the French connecting criteria are met. This is one of the reasons why it is risky to assume that "living in Israel" is enough, on its own, to take assets out of the scope of French taxation.

The particular role of life insurance in passing on wealth

This is where life insurance has a place of its own, in both legal systems. In France as in Israel, a life insurance or death cover contract with a clearly designated beneficiary works legally as a stipulation for a third party: the capital is paid directly to the person designated, outside the classic succession process (opening of the estate, notarial deed in France, or "tsav yerousha" in Israel). In France, this principle is notably set out in Article L132-12 of the Insurance Code, and the French tax authority itself points out that sums paid to the beneficiary of a life insurance contract are in principle treated outside the estate, under certain conditions linked in particular to the age at which the premiums were paid.

This logic of directly designating a beneficiary, which avoids the delays and complexity of an inheritance procedure, is therefore found on both sides, even if the tax regimes that then apply differ markedly between France and Israel. It is a sentence worth remembering: in both countries, a correctly designated beneficiary on a life insurance contract generally receives the capital directly, without waiting for the full settlement of the estate.

For an oleh, this means that a life or death insurance taken out in Israel, with up-to-date beneficiaries, can be a useful tool to ensure that their loved ones quickly have liquid funds after a death, including while the broader inheritance aspects (property, bank accounts, assets held in France) are being settled, which can take time on both sides.

Why this subject cannot be handled alone

Franco-Israeli inheritance taxation depends on many personal parameters: your status as an oleh (date of aliyah, any temporary tax benefits linked to this status), your current tax residence and that of your heirs, the nature and location of your assets, and the possible evolution of these rules over time. No blog article, however detailed, can replace an individual analysis, and we deliberately refrain from putting forward a specific rate or threshold here, as these elements vary so much according to situations and the texts in force.

Good practice is to combine two complementary kinds of expertise: a notary or tax adviser specialised in international Franco-Israeli inheritance, for the legal and tax dimension of your personal situation, and a broker specialised in life insurance in Israel for the insurance dimension, that is, how your contracts are structured and your beneficiaries designated. These two views complement each other; they do not replace one another.

If you would like to review your life insurance or death cover contracts in Israel, our francophone team remains at your disposal via our contact page , for a no-obligation discussion.