If you’re an American living in Israel with U.S. investments, you’re navigating two tax systems that don’t always align. In this webinar, Douglas Goldstein, CFP®, and Ron Zalben, CPA, explained the latest U.S. tax law changes, their interaction with Israeli rules, and how they affect estate planning, investing, and charitable giving. While the rules are complex, the key is knowing where the risks lie and working with professionals who specialize in cross-border planning.
- Estate Taxes: Higher, Not Lower
Recent legislation made the U.S. estate tax exemption permanent at $15 million per person ($30 million per couple). This is much higher than the old ~$7M level that had been set to return in 2026.
Why it matters: Even if you’re not in the $30M range, many people underestimate their wealth when you add Israeli real estate, retirement accounts, and inherited assets. Estate planning is about more than just tax. It’s about structuring accounts correctly and ensuring your documents (wills, trusts, beneficiaries) line up with your goals.
- Worldwide Assets Count
For U.S. citizens, estate tax applies to worldwide assets, including Israeli apartments, local investments, and even cryptocurrency. Many people mistakenly think only U.S. assets are included.
Takeaway: Don’t ignore Israeli holdings when evaluating estate exposure.
- Inherited Accounts and Step-Up Rules
- U.S.: Heirs may receive a “step-up in basis,” resetting the cost basis of assets to the value at the decedent’s death. That can reduce capital gains tax when sold.
- Israel: Does not provide a step-up if the person who passed away was an Israeli resident. In practical terms, that means if your parent bought shares decades ago for $10,000 and they’re worth $1 million when you inherit them, Israel may still treat your cost as $10,000, so you could face tax on the entire gain when you sell. By contrast, if you inherit from someone who lived in the U.S., you may be able to apply for a special “green track” ruling in Israel, which allows the inherited value to reset to the date-of-death price. That can sometimes wipe out a lifetime of built-in gains and save heirs a huge tax bill.
Takeaway: Cross-border inheritances require careful coordination to avoid double taxation.
- IRAs and Required Distributions
- Beneficiaries of U.S. IRAs now have to empty the account within 10 years. Spreading withdrawals usually makes more sense than taking one lump sum.
- Required Minimum Distributions (RMDs): At age 73, IRA owners must begin withdrawals. Missing RMDs can lead to stiff penalties.
Takeaway: Automating withdrawals and working with professionals helps avoid mistakes, especially for Israelis who inherit IRAs and face extra account transfer hurdles.
- Gifting Strategies
- Each year, you can give up to $19,000 to as many people as you like—and if both you and your spouse give, that’s $38,000 per recipient. These annual gifts don’t count against your $15 million lifetime exemption, so they’re completely outside of the estate tax system. If you give more than the annual amount, the extra starts to reduce your lifetime exemption, but you still won’t pay tax until your total gifts and estate together exceed the $15 million limit. This makes gifting a practical way to help children or grandchildren today, while gradually lowering the size of your estate for the future. Just remember: once money is given, it’s no longer yours, so be sure you’ll still have enough to cover your own needs.
- Remember: once you gift money, it’s no longer yours. Don’t overextend.
Takeaway: Gifting can reduce future estate size, but always confirm you can still cover your own lifetime needs first.
- Charitable Giving
- U.S. rules: Donating appreciated stock lets you avoid capital gains and still get a tax deduction. Even non-itemizers may deduct small donations.
- Israel: Since a recent change, donating appreciated stock to Israeli charities can also avoid triggering capital gains. But whether U.S. or Israeli donations make sense depends on your overall tax picture.
Takeaway: Charitable giving can be both generous and tax-smart, but there’s no one-size-fits-all strategy.
- Senior Deduction
Americans age 65 and older get an extra standard deduction when filing their U.S. taxes, and this provision is scheduled to last through 2028. For a married couple filing jointly, that’s an additional $12,000 off their taxable income—on top of the regular standard deduction. The practical effect is that less of their income is exposed to U.S. tax. And because of the U.S.–Israel tax treaty, this lower U.S. taxable amount may also reduce the tax Israel charges. In other words, a rule designed to help American seniors can end up cutting taxes in both countries at the same time.
Takeaway: Even modest deductions can reduce cross-border tax bills.
- Practical Risks and Real-Life Stories
- Holding inherited stocks just because a parent bought them decades ago may not fit your goals today.
- U.S. custodians sometimes refuse to open inherited IRA accounts for Israelis. Specialized firms that handle cross-border clients can help ensure assets stay “qualified” and avoid accidental taxation.
- Estate planning is not just about minimizing tax; it’s about ensuring your wealth supports your lifestyle and legacy.
Bottom Line
The rules are complicated, and every family’s situation is unique. The wrong move can cause unnecessary taxes or even block access to accounts. But with careful planning, and by working with cross-border professionals, you can simplify the process and protect your wealth for yourself and your heirs.
Disclaimer
This handout is for educational purposes only and is not intended as tax, legal, or investment advice. Tax laws change, and individual circumstances vary. Always consult qualified U.S. and Israeli tax advisors and financial professionals before making decisions.