Taxation of trusts – part 5, Israeli-Resident Beneficiary Trust & Non-Israeli Resident Beneficiary Trust
The Israeli Resident Beneficiary Trust
This is the opposite situation. The settlor is an Israeli resident, but the beneficiaries are not. In such a case, there is no Israeli taxation on assets and income outside Israel.
However, there are very strict rules surrounding the details as to when a trust can qualify as a Foreign Beneficiary Trust:
(1) The trust is deemed irrevocable (see here for more).
(2) All beneficiaries (including those not yet born) can be identified and are non-resident in Israel.
(3) The trust deed forbids any Israeli resident becoming a beneficiary, and any non-resident beneficiary loses their status when they become Israeli resident.
It is this last clause that will normally cause a trust not to be classified as a Foreign Beneficiary Trust.