Wiring an Israeli Inheritance to a US Bank: The Branch Withholds 25 Percent of Any Payment Abroad Unless Someone Signs the Declaration, the 1993 Instruction That Puts Estate Money on the Exempt List, and the American Report That Cannot Exist on the Day of the Transfer

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.

A woman in Chicago finally has the document she waited eleven months for: the succession order for her mother's estate in Haifa, issued by the Registrar of Inheritance Affairs, naming her and her brother in Tel Aviv as the heirs. Her mother's account at a Haifa branch holds about 900,000 shekels. Her brother takes his half the same week. Hers has to cross an ocean, and the branch tells her that before it sends anything, there are forms, a question about where the money is going, and something about tax being taken off the top.

A second heir, in Los Angeles, has already been through the forms. He sold his late father's apartment in Netanya, the proceeds sat in an Israeli account in his own name for three months while the clearances came through, and the wire arrived in California in two pieces. His accountant now wants to know which date to use for the dollar value, whether the Israeli account is on a form it has never been on before, and why the bank in Israel asked him to prove he had reported an inheritance he had not yet received.

Both of them are at the same place in the map: the money is released, and it has to move. This page covers what the Israeli bank is required to do before it sends inherited money to the United States, the one signature that stops the 25 percent, what the bank asks that has nothing to do with tax, and what the wire sets in motion on the American side.

Why the Israeli bank starts at 25 percent

Section 170(a) of Israel's Income Tax Ordinance puts the duty of withholding on anyone who pays a foreign resident an amount that is chargeable income in Israel. Since an amendment that took effect in March 1992, the duty also sits on the financial institution through which the payment passes. The Israel Tax Authority spelled out how banks apply it in Income Tax Execution Instruction 34/93, issued on May 30, 1993, and that instruction is still the operating manual. Its rule for banks is blunt: for any type of payment not on its list, the bank withholds 25 percent unless it holds an original written certificate from an assessing officer or an authorized accountant ordering a lower rate or an exemption. Bank Discount's published page on the subject puts the current rates the same way: 25 percent for an individual recipient, the corporate rate for a company, 23 percent in 2026.

The logic is not that an inheritance is income. It is not, and Israel has had no inheritance tax since 1981, which the apartment page explains. The logic is that the bank is the last Israeli checkpoint the money passes, and the Tax Authority uses that checkpoint for every kind of payment, taxable or not, by making the exemption something the customer has to claim rather than something the bank assumes.

The 1993 list, and where estate money sits on it

Section 3 of Instruction 34/93 lists the payments a bank may send abroad without withholding, on the payer's declaration and, where the instruction says so, on supporting documents. Several of the entries belong to this site's readers.

Entry 3.26 is the one that matters here: estates, on the basis of a succession order or a court confirmation concerning the estate, up to the amounts attributed to the heirs abroad. Entry 3.22 covers the proceeds of a real estate transaction, provided there is a certificate from the land appreciation tax office that the tax was paid in full or that the sale was exempt. Entry 3.31 covers the proceeds of selling or redeeming securities traded on the Tel Aviv Stock Exchange. Entry 3.24 covers National Insurance allowances, which is how a Bituach Leumi survivors' pension leaves the country, and entry 3.28 covers gifts and support to relatives as section 88 of the Ordinance defines them, which is how an Israeli sibling sends an American sibling money that is not inheritance at all.

Two things in the wording of entry 3.26 decide how the branch behaves. The first is that the basis is the order. No succession order or probate order, no transfer, and the succession-order page covers how an heir in the United States obtains one. The second is the cap: the amounts attributed to the heirs abroad. The branch will send abroad the share the order gives the foreign heir, and no more. If the heirs rearranged the split under a section 110 estate distribution agreement, which the distribution-agreement page walks through, the number the bank sees in the order and the number the heirs agreed on are different, and the agreement has to go to the branch with the order.

The instruction adds a caution in section 1.4 that reads like a footnote and is not: an exemption from withholding at the bank does not settle whether the payment is taxable in the recipient's hands. For an inheritance that question has an easy answer in both countries. For money that only looks like inheritance, say a share of rent the apartment earned after the death, it does not, and the rental page covers that income separately.

The signature that stops the withholding

The exemption in entry 3.26 is not automatic. The instruction ties it to a payer's declaration, in 1993 on a form called 114 and today on Form 2513, Declaration Regarding a Payment to a Foreign Resident and Request to Reduce Withholding, which the Tax Authority lists on its government services site and which banks keep on hand. Bank Discount's page describes the practice in one sentence: a transfer of inheritance money to a foreign resident, made through the bank in accordance with the will or the succession order, is as a rule not subject to withholding, and the transferor is required to sign the payer's declaration on Form 2513. Bank Mercantile's page says the same.

The word transferor is doing work. The person who signs is whoever gives the bank the instruction to send the money: an estate administrator if the court appointed one, which the mnahel izbon page covers, the Israeli co-heir who is handling the account, or the American heir in whose name the account now stands after the order was registered. A branch that is not asked for the declaration, or that is handed a transfer instruction without it, is back in section 2.3 of the instruction and withholds 25 percent.

If that happens, the money is not gone, but it is in Jerusalem. Section 11 of the instruction says a refund of tax withheld in excess from a foreign resident who has no Israeli tax file is made by the Tax Authority's collection department, after a check at the assessing office, and only against original documents showing the amount withheld when the money left. It adds that where the activity justifies a full return, the refund can be made conditional on opening a file in the recipient's name and filing an annual return. A signature at the branch is cheaper than that.

Readers who have seen the phrase "declaration track" in Israeli tax news should know it is a different door. In September 2017 the Tax Authority let banks send certain capital transfers abroad, investments in foreign shares and foreign real estate among them, on a separate declaration, Form 2513/2, without an assessing officer's certificate, and in December 2025 it widened that track to every treaty country and every CRS country and added purchases of digital assets. None of that touches estate money, which has been on the no-withholding list since 1993 and goes out on the older declaration. The United States is a treaty country in any case.

What the bank asks that has nothing to do with tax

The declaration solves withholding. It does not oblige the bank to send the money, and a second body of law is the reason the branch asks where the money came from and where it is going.

Under the Prohibition on Money Laundering Law, 5760-2000, and the Order that applies it to banks, the Prohibition on Money Laundering Order (Identification, Reporting and Record-Keeping Obligations of Banking Corporations for the Prevention of Money Laundering and Terror Financing), 5761-2001, every Israeli bank runs a know-your-customer process that the Bank of Israel supervises under Proper Conduct of Banking Business Directive 411. Two parts of the Order reach a transfer like this one. Section 8(a)(7) requires the bank to report to the Israel Money Laundering and Terror Financing Prohibition Authority any transfer from Israel abroad, or from abroad to Israel, of at least 1,000,000 shekels, simply because of its size; the Bank of Israel's sanctions committee has fined banks for missing those reports. Section 9 requires a report of any activity the bank considers unusual. Neither report is a finding against anyone. Both mean the branch wants the file to explain itself: the succession order, the death certificate, the heir's identification, and a plain account of why a sum is leaving an estate account for a bank in Illinois.

An American heir brings one more document. Israel signed its FATCA agreement with the United States in Jerusalem on June 30, 2014, and it has been in force since August 2016. An Israeli bank that identifies an account holder as a US person asks for a W-9 and reports the account to the Tax Authority, which passes it to the IRS. For a wire that goes straight from the estate's account to the United States that step may never arise. For the Los Angeles heir, whose sale proceeds sat in an account in his own name, it already has.

One line on Bank Discount's page deserves its own paragraph. It says that when paying inheritance money to a foreign-resident heir, the bank must verify, among other things, that the inheritance was duly reported to the tax authorities in the heir's country of residence, and that the heir may be asked for confirmation that it was. For a US heir that request collides with the American calendar. The American report of a foreign inheritance is Form 3520, and it is filed with the income tax return for the year the money is received, after the year ends. On the day of the wire it cannot exist. The way through is to ask the branch, before the transfer date, exactly what document it will accept, and to have the US preparer write that document rather than argue with the branch afterwards.

Shekels, dollars, and the date on the receipt

The Israeli bank can send shekels or dollars. A shekel wire is converted somewhere between Haifa and Chicago at a rate the heir did not choose. Ask the Israeli branch for its dollar rate and its transfer fee, and ask the American bank whether it accepts an incoming wire in foreign currency at all and what it charges to convert one.

The conversion matters a second time on the American return. The IRS's rule for amounts received in foreign currency is to use the exchange rate prevailing when the item is received, and it accepts any posted rate used consistently. Keep the bank advice showing the shekel amount, the dollar amount and the value date; that one piece of paper answers the Form 3520 question, the FBAR question and, years later, the basis question.

What the wire starts in the United States

The inheritance itself is not income. Section 102(a) of the Internal Revenue Code keeps property acquired by bequest, devise or inheritance out of gross income, and nothing about the wire changes that.

What the wire does is start three reports, two of them depending on the route the money took.

Form 3520, Part IV, is the one every route triggers above the threshold. A US person who receives more than $100,000 in a tax year from a nonresident alien or a foreign estate reports it on Form 3520, due with the income tax return for that year, including extensions. The Chicago heir receiving the dollar equivalent of 450,000 shekels crosses the line in one wire. The Los Angeles heir whose proceeds arrived in two pieces adds them up within the year. The late-Form-3520 page covers what the missing form costs.

The FBAR depends on the route. If at any point in the year the heir held an Israeli account in his own name, or had signature authority over one, and the combined value of his foreign accounts exceeded $10,000, the account goes on the FinCEN Form 114 for that year, valued at the Treasury's year-end exchange rate. The Los Angeles heir's three-month account qualifies even though it was empty by December. The Chicago heir, if her share goes directly from her mother's estate account to her bank in Illinois, may never have held an Israeli account at all, and the FBAR page explains the difference. Form 8938 follows the same account at its own, higher thresholds.

The American bank has its own rules, and they are quieter than most heirs expect. A currency transaction report is filed for cash over $10,000, under 31 CFR 1010.311, and a wire is not cash. What applies to a wire is the funds-transfer recordkeeping rule in 31 CFR 1010.410, which makes both banks keep records of any transfer of $3,000 or more and makes the originator's name and account details travel with the money. When the originator is an estate, the name on the incoming wire is not the heir's name, and the receiving bank may ask what it is looking at. Telling the American bank in advance that an inheritance wire is coming, with the succession order and a translation in hand, is the whole preparation.

Two routes are worse than a wire. Carrying more than $10,000 in currency or monetary instruments across the border, a cashier's check included, requires a FinCEN Form 105 at the border under 31 CFR 1010.340, with forfeiture among the penalties for skipping it. And selling Israeli securities from the deceased's account before the transfer is a separate Israeli tax event: entry 3.31 lets the proceeds leave without withholding on the proceeds, but the bank withholds Israeli tax on the gain itself under the 2002 securities-withholding regulations unless an exemption is on file, and the fund units Israelis hold are usually PFICs on the American side, as the PFIC page explains. Ask before anything is sold.

What to do before the transfer date

Get the order first, then get the bank's list. Before any transfer date is set, ask the branch, in writing, for every form it will want: Form 2513 or its own equivalent of the payer's declaration, its foreign-currency transfer instruction, a W-9 if the account is in a US person's name, and whatever it means by confirmation that the inheritance was reported abroad. Ask who it expects to sign the declaration.

Match the numbers. The bank will send the foreign heir the share the order gives him, so if the heirs divided the estate differently by agreement, the agreement goes in with the order, and if the money is apartment proceeds, the land appreciation tax certificate goes in with it, as the selling page describes.

Decide the route. A direct transfer from the estate account to the American bank avoids an Israeli account in the heir's name and, with it, the FBAR for that year. An Israeli account in the heir's name is sometimes unavoidable, and it is not a problem, but it is a form.

Decide the currency, and keep the advice. Then tell the American bank what is coming.

If the branch withheld 25 percent anyway, do not treat it as the tax on an inheritance; there is none. Treat it as money held in Jerusalem, and start the section 11 refund with the original bank advice in hand.

Orientation only, not legal or tax advice. A bank's forms change, a branch's practice changes faster, and the sums here are large enough that an hour with a cross-border professional before the transfer date is cheap.