Did you know that millions of shekels are unintentionally lost or tangled in endless bureaucracy every year in Israel due to simple inheritance mistakes? Whether it’s your pension funds (Keren Pensia), manager’s insurance (Bituach Menahalim), or education funds (Keren Hishtalmut), a small oversight could cost your loved ones dearly.
Let’s unpack these mistakes clearly, understand why they’re significant, and reveal simple steps to ensure your money goes exactly where you intend it to—without getting trapped by taxes or paperwork.
Mistake #1: Not Defining Beneficiaries (Motavim)
One of the simplest yet most damaging mistakes people make is neglecting to set beneficiaries for their financial products.
But wait—what exactly is a beneficiary (Motav)?
A beneficiary is a person you officially designate to receive the money from your financial accounts or insurance policies if you pass away. Without clearly defined beneficiaries, banks or insurance companies won’t automatically transfer the funds to your family, even if you’ve written a will (Tzava’a).
Instead, your loved ones might be forced into months—sometimes even years—of frustrating bureaucracy, endless forms, and court visits, just to claim what’s rightfully theirs.
Actionable Advice:
- Immediately verify and update your beneficiaries across all financial products.
- Ensure details are accurate and updated after major life events, such as marriage, divorce, or childbirth.
Mistake #2: Ignoring the Tax Implications of Passing Money Between Generations
Taxes might not be the first thing on your mind when planning your inheritance, but misunderstanding Israel’s tax rules could significantly shrink your family’s inheritance.
Here’s an eye-opening example:
In survivor pensions (Bituach She’erim), there’s a monthly tax-free allowance—roughly around 9,700 shekels per month. Above that amount, your heirs must start paying income tax. Many Israelis aren’t even aware of this, unintentionally burdening their loved ones with unexpected taxes.
On the other hand, did you know that in manager’s insurance (Bituach Menahalim), your heirs typically receive a single lump sum, entirely tax-free? This is a huge advantage, yet most Israelis don’t utilize this to their full benefit.
Actionable Advice:
- Consult with a financial advisor who specializes in inheritance planning.
- Compare the tax implications of different savings and pension funds.
- Consider spreading your assets strategically across different financial instruments.
Mistake #3: Believing a Will Alone Covers Everything
Yes, having a clear, well-prepared will (Tzava’a) is essential. But here’s the catch—banks and insurance companies often require much more than a will to release funds after someone passes away.
For example, even with a perfectly written will, your family might be asked for additional documentation, proof of beneficiaries, or court validations. This adds unnecessary stress during an already difficult period.
To avoid this, take proactive steps:
Actionable Advice:
- Clearly list beneficiaries directly on every insurance policy and bank account (beyond just writing them in your will).
- Keep documentation organized and inform your family members exactly where it can be found.
- Consider legal guidance to simplify complex inheritance processes.
Too Long; Didn’t Read (TL;DR):
- Always define clear beneficiaries on all your financial products—pensions, insurance, and education funds.
- Understand tax implications (especially between survivor pensions and manager’s insurance) to ensure your heirs keep more of your money.
- Don’t rely solely on a will; proactively set up beneficiaries and documentation directly with banks and insurers.
So, which of these mistakes might you or your loved ones have made? Share your thoughts and experiences below—your story could help someone else avoid costly errors in the future!
