Avrum Aaron & Assoc.

Why Israelis With U.S. Financial Assets Need a U.S. Trust — Before It’s Too Late

For many Israelis, investing in the United States is almost routine. Bank accounts, brokerage accounts, retirement plans, life-insurance-based investments, or partnership interests in U.S. funds are common parts of a diversified portfolio.

But one issue is frequently ignored until it becomes a very real—and very expensive—problem: what happens to those assets when the owner dies.

If you live in Israel and own only U.S. financial assets—no real estate, no business—you might think the transfer to your heirs will be simple. Unfortunately, it’s usually not. In fact, your family may end up trapped in a legal maze involving two countries, two court systems, and months (sometimes years) of delay.

This is exactly why many Israelis choose to place their U.S. assets into a properly structured U.S. trust. Here’s why.

1. The Core Problem: Getting Jurisdiction for Probate

When a person dies owning U.S. financial assets in their own name, the financial institution will freeze the accounts until they receive valid probate documents.

But here’s the trap:

Israeli probate orders are not automatically accepted by U.S. institutions.

Each U.S. brokerage firm, bank, or fund must decide whether an Israeli court order is sufficient under its internal compliance rules. Many simply say no.

Why?

Because probate jurisdiction in the U.S. is determined by the courts of the state where the deceased was:
- domiciled, or
- owned property, or
- had assets requiring an in-state probate process.

If you live in Israel, you are not domiciled in any U.S. state—and you usually have no physical presence there. As a result:

No U.S. court automatically has jurisdiction over your U.S. financial assets.

So your heirs must often try to open a “foreign ancillary probate” in a U.S. state that the financial institution chooses—sometimes New York, sometimes Delaware, sometimes wherever the company’s headquarters are.

That creates a chain reaction of problems:
- Hiring U.S. counsel
- Providing notarized and apostilled documents
- Producing original wills
- Complying with foreign-probate procedures
- Months of delay before assets can be transferred

I regularly see heirs stuck with 6–18 months of administrative work simply to access a brokerage account.

2. U.S. Trusts Eliminate the Jurisdiction Problem Entirely

When U.S. financial assets are held in a revocable U.S. trust (a “living trust”):
- The trust, not the individual, owns the account.
- On death, the trust does not go through U.S. probate.
- The successor trustee can access and distribute assets immediately.

No court.
No probate.
No Israeli-U.S. legal conflict.

The financial institution deals directly with the trustee under standard U.S. trust rules. This removes the entire question of “which court has jurisdiction?” because no court needs jurisdiction.

3. What About Tax?

For Israelis, a properly drafted U.S. revocable trust is:
- Ignored for U.S. income tax (you report income as before)
- Ignored for Israeli income tax (same reporting as before)
- Not a gift when funded
- Not taxable to beneficiaries on distribution

A trust designed correctly for a non-U.S. resident avoids estate tax problems as well.

4. Additional Benefits Beyond Probate

Once your U.S. assets are in a trust, you also get:

Privacy
Probate filings (even in Israel) are public. A trust is not.

Continuity
If you become incapacitated, your successor trustee can manage U.S. accounts immediately—no guardianship applications.

Clear instructions
You control exactly who receives your U.S. assets, when, and under what conditions.

Lower legal costs
The cost of creating a U.S. trust is far lower than hiring U.S. and Israeli lawyers later to navigate multi-jurisdiction probate.

5. The Bottom Line

If you live in Israel and have even modest U.S. financial assets, you are exposed to a very specific legal problem: no U.S. court has obvious jurisdiction to probate those accounts when you die.

A revocable U.S. trust eliminates that risk, giving your family immediate access without legal battles, delays, or uncertainty.

Most Israelis don’t realize this until someone in their community dies and the heirs spend a year fighting to unlock a frozen U.S. account.

Setting up a trust is simple, inexpensive, and completely customizable. And it ensures that your U.S. investments pass to your family smoothly and privately—exactly the way you intended.

Avrum Aaron
054 398-4380
[email protected]

Avrum Aaron & Assoc. Law Firm for Entrepreneurs

Why TOD/POD Designations Often Fail and Why People Use Trusts Instead

Last week, I posted on the use of trusts to avoid US probate. I received the following question on Facebook from Na Hauser: Do u need to go to probate and a will if u sign a TOD with the investment company?

Great Question!

Here are some reasons why a Trust works better than a TOD:

1. TODs Do Not Handle Incapacity
A TOD only transfers property after death. If the owner becomes incapacitated, a TOD does nothing. The account may become frozen, and a court-appointed guardian might be required. A revocable trust allows a successor trustee to step in immediately without court intervention.

2. TODs Cause Problems If Beneficiaries Die Out of Order
If a beneficiary dies before the owner and the designation is not updated, the share may lapse. Many TOD forms do not handle per-stirpes distributions properly. (Note: Per Stirpes means that each family branch gets its share: if a child dies before you, that child’s share goes to their children, not to your other children. It keeps the inheritance within each branch of the family) Trusts handle these contingencies cleanly.

3. TODs Cannot Manage Minor Beneficiaries
A TOD to a minor is ineffective because banks will not release funds to a minor. This triggers guardianship proceedings and ongoing court supervision. A trust avoids these issues and allows structured distributions.

4. TODs Do Not Protect Beneficiaries
A TOD gives assets directly to a beneficiary with no protection from divorce, creditors, or mismanagement. Trusts can provide these protections.

5. TODs Create Problems With Real Property
TOD deeds can create issues with title insurance, refinancing, and disagreements among beneficiaries. Some states do not even permit TOD deeds for real property. Trusts avoid these complications.

6. TODs Cannot Coordinate Multiple Assets or Complex Wishes
TODs only control specific accounts or assets. They cannot coordinate entire estates, manage taxes, or implement long-term planning. A trust centralizes everything.

7. TODs Complicate Cross-Border or Non-U.S. Heirs
Foreign heirs or heirs living in Israel may face additional documentation requirements or delays. A trust consolidates control with a U.S. trustee who can manage everything smoothly.

8. TODs Can Trigger Probate Anyway
Beneficiary deaths, missing paperwork, or institutional errors can invalidate TODs and force probate. Trusts avoid this fragility.

Bottom Line
Revocable trusts handle incapacity, avoid probate reliably, protect children, prevent disputes, and work across jurisdictions. TODs are suitable only for simple situations, while trusts offer a robust estate-planning solution.

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