{"id":8587,"date":"2025-10-05T08:18:57","date_gmt":"2025-10-05T08:18:57","guid":{"rendered":"https:\/\/aboulafia.co.il\/?p=8587"},"modified":"2025-10-05T08:18:57","modified_gmt":"2025-10-05T08:18:57","slug":"taxation-of-trusts-part-3-the-relatives-trust","status":"publish","type":"post","link":"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-trusts-part-3-the-relatives-trust\/","title":{"rendered":"Taxation of trusts \u2013 part 3, the Relatives Trust"},"content":{"rendered":"<p style=\"text-align: left;\">The biggest change in the 2014 amendments to the trust taxation law relate to these types of trust.<\/p>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">This is a trust whereby all of the settlors are not \u2013 and have never been since inception of the trust \u2013 Israeli resident, but at least one of the beneficiaries is Israeli resident. Further, there is a family relation between settlors and beneficiaries.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">The cases are clear where the relationship is that of spouse or (grand)parent. Where the relationship is of other first degree relations, the tax authority must be satisfied that the trust has been set up in good faith and that the beneficiaries did not contribute anything towards the trust assets.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">For Israeli assets and income, tax is levied as for any Israeli individual. For overseas assets and income:<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">The default taxation position is that the beneficiary pays a flat 30% tax on any distribution that they receive. Of this, any principal is not taxable, but the onus to prove this may be on the trustee. Further, it is assumed that profits are distributed before capital.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">However, an election can be made to tax the trust income \u2013 on an ongoing basis \u2013 at a flat 25%. For these purposes, the taxable income is based on the percentage of beneficiaries who are Israeli resident. This election has to be made early on in the life of the trust, and cannot be changed. In this case, the distributions will be tax-free.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">It should be noted that where a beneficiary is a new immigrant or (veteran) returning resident, the exemptions available to them also apply to their portion of the incomes during the relevant exemption period.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">It is important to know that such a trust ceases to be classified as a Relative Trust when the settlors pass away.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">And of course, there are a number of forms and deadlines to meet.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">For more information, best to speak to an expert.<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The biggest change in the 2014 amendments to the trust taxation law relate to these types of trust. This is a trust whereby all of the settlors are not \u2013 and have never been since inception of the trust \u2013 Israeli resident, but at least one of the beneficiaries is Israeli resident. Further, there is [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[200,206,253],"tags":[],"class_list":["post-8587","post","type-post","status-publish","format-standard","hentry","category-israeli-taxation-en","category-taxation-for-trusts-en","category-binyamin-radomsky-en"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Taxation of trusts \u2013 part 3, the Relatives Trust - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-trusts-part-3-the-relatives-trust\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Taxation of trusts \u2013 part 3, the Relatives Trust - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df\" \/>\n<meta property=\"og:description\" content=\"The biggest change in the 2014 amendments to the trust taxation law relate to these types of trust. 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