A testamentary trust is one whereby the trust comes into existence as a result of the will of an Isrseli resident upon the death of the settlor. Such a trust is taxed based on the residence of the beneficiaries. If none of the beneficiaries are Israeli resident, the trust is deemed non-resident and hence exempt from Israeli taxation on income earned outside ISRAEL. If however, there is one beneficiary who is an Isrseli resident, the entire trust is taxable. A noticeable exception will apply if the Isrseli resident beneficiaries are all within their ten-year exemption period – assuming of course that all income