by Melvin A. Warshaw & Dave Wolf
What if a trust beneficiary moves to Israel?
Like the United States, Israel has now moved aggressively to tax local resident beneficiaries on foreign trust income. Until 2014, Israel generally exempted from local income tax any trust established by a foreign settlor, even if there were Israeli resident beneficiaries who received trust distributions. In late 2013, Israel altered its taxation of trusts, migrating from a settlor-oriented model to a beneficiary-oriented model.
Because Israel doesn’t have an estate/inheritance tax or a gift tax, legitimate gifts and inheritances are free of tax for both the donor (decedent) and the recipient. Obviously, a U.S. citizen moving to Israel faces different tax rules unless he renounces U.S. citizenship.