Inheritance for a US Citizen in Israel: What You Report, and What You Almost Never Pay

When a parent passes away, paperwork is the last thing anyone wants to think about. But a US citizen in Israel has a few points worth knowing in advance, because they depend on who left the inheritance, where the money was, and in what form it reached you.

Usually: no tax on the heir

In the US, estate tax is imposed on the estate itself, not on the person receiving it, and the inheritance itself isn't income on the heir's return. When the person who passed away was a US citizen, the estate owes tax only above $15 million per person ⁦(as of 2026)⁩. For most families that simply isn't relevant. And Israel has no inheritance tax.

Inheriting from an Israeli parent: Form 3520

This is the case that's easiest to miss. A US citizen who received more than $100,000 in one year in inheritances or gifts from someone who isn't American, or from a foreign estate, has to report it on Form 3520. There's no tax on it, it's only a report. But the penalty for not reporting can reach a quarter of the amount, so it's important not to skip it.

An Israeli parent who held assets in the US

If the person who passed away wasn't a US citizen or resident but held assets in the US, for example an apartment or a portfolio with a US broker, the threshold is entirely different: above $60,000 in US assets, the estate has to file a US estate tax return. It's worth checking early, because US brokers tend to freeze the account until the documents are presented.

A US retirement account passed to you

An IRA or 401⁦(k)⁩ inherited from a parent isn't like ordinary money. Withdrawals from it are taxable income on your return, and an heir who isn't the spouse generally has to empty the account within ten years. How and when you withdraw over that decade directly affects how much tax you pay.

What does work in your favor: value at date of death

An inherited asset is generally recorded at its value on the date of death, not the price the parent paid for it. If you sell it soon afterward, there will be almost no gain to report. That's why it matters to document the value on that day, for example with a bank statement or an appraisal for an apartment.

And don't forget the FBAR

Money moved into a bank account in Israel, or a parent's account you have signature authority over while handling the estate, counts toward that year's FBAR threshold.

How we help

We help you understand exactly what applies to you, gather the documents from banks and brokers, and coordinate with a licensed US accountant when Form 3520, an estate return or a retirement-account withdrawal is needed. With sensitivity, and at your pace. An initial check with no commitment.