This is orientation, not legal or tax advice. It maps what exists and the questions to take to a licensed professional. It does not tell you what to do about your own estate or taxes.
layout: article.njk title: "Inheriting a US IRA or 401(k) as an Israeli Resident: How the Tax Actually Works" sub: "The SECURE Act ten-year clock, US withholding, the 1975 treaty, and the oleh exemption, and where they collide." query: "What happens to a US IRA I inherit while living in Israel?" date: 2026-06-29 tags: reactive order: 110 permalink: "/reactive/inherited-us-ira-401k-israel/" checkedOn: "June 29, 2026" description: "If you live in Israel and inherit a US IRA or 401(k), two separate ten-year rules and a 30% US withholding all start at once. Here is the cross-border map." sources:
- 'IRS, Publication 590-B, Distributions from IRAs (the ten-year rule and required minimum distributions for beneficiaries). irs.gov'
- 'IRS, Retirement topics: Beneficiary. irs.gov'
- 'IRS, Plan distributions to foreign persons require withholding (the 30% default and the Form W-8BEN exception). irs.gov'
- 'IRS, NRA withholding under sections 1441 to 1443 of the tax code. irs.gov'
- 'IRS, Claiming tax treaty benefits with Form W-8BEN. irs.gov'
- 'IRS, US-Israel income tax treaty documents and technical explanation (Article 20 private pensions; Article 6 savings clause; the treaty covers income tax, not estate tax). irs.gov'
- 'Israel Tax Authority: new immigrants and senior returning residents receive a ten-year exemption on foreign-source income, including foreign pensions, and Israel imposes no estate or inheritance tax.'
You are living in Israel. A parent or relative in the United States dies, and you learn you are the beneficiary of their IRA or 401(k). The money is real, the account is yours, and your first instinct is to leave it alone until you decide what to do.
That instinct is the expensive one. A US retirement account inherited by someone who lives in Israel is not a single tax question. It is four rules running at the same time, on the same money, each keyed to a different event. Two of them are ten-year clocks that start the moment someone dies or the moment you made aliyah. Get the order wrong and you can hand the US a withholding bill you never owed, or back yourself into a final-year tax spike you could have spread out.
Here is the map of what is actually happening, with each piece tied to the agency that controls it.
The account does not just sit there: the SECURE Act ten-year rule
The first surprise is that you usually cannot leave an inherited US retirement account alone. The SECURE Act of 2019 ended the old stretch IRA for most non-spouse heirs. Under the rule, if the original owner died after December 31, 2019, a non-spouse beneficiary generally has to empty the entire account by December 31 of the tenth year following the year of death. The IRS sets this out in Publication 590-B and on its Retirement topics: Beneficiary page.
In July 2024 the IRS finalized the part that confused everyone for years. If the original owner died on or after their required beginning date for required minimum distributions (the age at which they had to start taking their own withdrawals, now 73), and the account is a traditional IRA, the heir must also take an annual required minimum distribution in years one through nine, not just empty the account by year ten. If the owner died before that date, or the account is a Roth, there are no annual minimums during the window, only the year-ten deadline. These rules apply for the 2025 distribution year forward.
Two practical notes that matter for someone living abroad. First, there is no 10% early-withdrawal penalty on inherited-account distributions, regardless of your age, because of the death exception in the tax code. Second, missing a required distribution is penalized through an excise tax of 25%, reduced to 10% if you correct it within the allowed window. So the deadlines are not optional, and the calendar is fixed by a death you did not schedule.
Every distribution is US-source income, and the US collects at the source
When the money comes out, it is US-source retirement income paid to a person who lives in a foreign country. That triggers a withholding regime most heirs have never heard of.
The IRS treats most US-source income paid to a foreign person as subject to a flat 30% withholding under sections 1441 through 1443 of the tax code, often called NRA withholding. The custodian or plan administrator is the withholding agent, and the IRS has been explicit, on its own Plan distributions to foreign persons require withholding page, that a plan paying a participant or beneficiary at a foreign address is expected to withhold. If the custodian has a foreign address on file and no paperwork establishing your status, the regulations presume you are a foreign person and apply the 30%.
This is income tax withholding, and it is separate from the US estate tax issue that affects a different situation entirely (a non-US person who dies owning US stock, which we cover in the companion piece on the $60,000 US-situs estate tax trap). For an inherited retirement account from a US owner, the live question is income tax on each distribution, and the default starting point is the US taking 30% off the top.
The 1975 treaty can move that tax to Israel, with one large exception
Here is where the relationship between the two countries matters. The United States and Israel have an income tax treaty signed November 20, 1975 and updated by protocols in 1980 and 1993. Note the words income tax. There is no US-Israel estate tax treaty, only this income treaty, and the income treaty is what governs an inherited retirement account.
Article 20 of the treaty covers private pensions. It provides that pensions and similar payments to a resident of one country are taxable only in the country where the recipient lives. The IRS has accepted, in a private letter ruling, that an IRA can be treated as a pension for treaty purposes. Put together, that means a beneficiary who lives in Israel and is not a US citizen can generally claim Article 20 and have the distribution taxed only in Israel.
The mechanism is paperwork, not a refund you chase later. To reduce that 30% withholding at the source, the beneficiary files Form W-8BEN with the custodian, certifying foreign status and claiming the treaty article. Done correctly, and with a taxpayer identification number in hand, the withholding rate can fall toward zero. File nothing, and you wait for the US to withhold 30% and then try to recover it by filing a US nonresident return. Same money, far more friction.
The large exception is the savings clause in Article 6, paragraph 3. It lets the United States keep taxing its own citizens as if most of the treaty did not exist. If the beneficiary is a US citizen living in Israel, Article 20 does not move the tax to Israel only. The US still taxes the distribution, Israel may tax it too, and the double tax is resolved through foreign tax credits under Article 26 rather than by the treaty simply assigning the income to one side. This is the single fact that separates a dual citizen's situation from an Israeli-only citizen's situation, and it changes the entire plan.
The Israeli side, and the oleh window that can change everything
Israel itself does not levy an inheritance or estate tax, so receiving the account is not a taxable event in Israel. The Israeli question is, again, income tax on the distributions.
This is where new immigrants and senior returning residents have a real advantage. Israel exempts foreign-source income, including foreign pensions, for ten years for people who became new residents (olim) or who returned after living abroad at least ten years. During that window, US pension and retirement-account distributions can be free of Israeli tax. After the ten years, the Israeli Income Tax Ordinance still offers relief on foreign pensions: broadly, either a 35% exemption under the provision olim know as section 9B, or a cap at the tax that would have applied in the country the pension came from.
Now hold both ten-year windows in your head at once, because this is the collision the title points to. The SECURE Act gives you ten years to empty the account, counted from the death. Israel gives you a ten-year exemption on foreign income, counted from your aliyah. These are two different clocks, keyed to two different events, and they almost never line up. An heir who made aliyah eight years ago and inherits today has only two years of the Israeli exemption left but a fresh ten-year US drawdown deadline. The timing of when you pull money out, and how much in each year, is the lever that decides the total bill.
What changed for 2026
There is a moving piece worth flagging rather than treating as settled. Israel's Amendment No. 272 ended the separate ten-year reporting exemption that new residents and veteran returning residents used to enjoy, for individuals who first become Israeli residents on or after January 1, 2026. As of the date this page was checked, the reporting change is what is documented, and it is distinct from the underlying tax exemption, with guidance still settling. If your residency start date is in 2026 or later, this is a question to raise early with a professional rather than assume the old reporting posture still applies.
Roth accounts follow a different path
If what you inherited is a Roth IRA, the ten-year deadline still applies for a non-spouse heir, but there are no annual required distributions during the window because Roth owners never had a required beginning date, and qualified distributions remain tax-free in the United States. The Israeli treatment of a Roth distribution is its own question and does not automatically mirror the US tax-free result, which is one more reason the two sides have to be planned together rather than assumed to agree.
What this means in practice
The accounts do not wait, the US collects first unless you tell it not to, the treaty can move the tax but not for a US citizen, and the Israeli exemption is a window that may already be closing. The sequence that protects you is roughly: confirm whether you are a US citizen or an Israeli-only citizen, get a taxpayer identification number and file the right W-8BEN before the first distribution rather than after, and then map the drawdown across the years so the forced ten-year emptying does not collide with the end of your oleh window or stack into one high-tax year.
None of that is a do-it-yourself project, and it is not the kind of thing a US-only accountant or an Israel-only accountant tends to get fully right, because the answer lives in the overlap. It is exactly the work a cross-border US-Israel attorney or CPA does. If you are sitting on an inherited US retirement account and you live in Israel, the most useful next step is to get the specific facts of your situation in front of someone who works both systems, before the next distribution date sets the terms for you.