Selling an Apartment After Death — Legal Guide to Sale by Inheritance

Selling an Apartment by Inheritance — What Heirs Need to Know

Selling a deceased person's apartment is one of the difficult and important decisions facing heirs. This is not merely an emotional decision, but a complex legal process involving steps in probate administration, land registration (Tabu), payment of taxes and debts, and resolution of potential family disputes. At Mandelboim, Gor, Witzman-Gor and Co. (Ramat Gan), we guide heirs through every stage of this process — from the initial legal proceedings through contract signing and deal closure.

On this page we will review the essential topics: who is entitled to sell an apartment by inheritance, what are the legal steps, how long the process takes, what taxes and obligations apply to heirs selling an apartment, and what common mistakes must be avoided.

Who Can Sell an Apartment by Inheritance? Heirs' Rights

Not every heir can independently decide to sell a deceased person's apartment. The right to sell property by inheritance depends on the stage of the legal process and the level of agreement among heirs.

While the case is still in probate administration: The apartment cannot be sold without court approval. During this period, the property is in the estate's ownership (of the deceased), and any transaction requires a court order. This is a procedure that may take weeks or months, depending on the court's workload and the case's complexity.

After the property has been distributed among the heirs: Each heir is entitled to sell their share of the apartment — but if the apartment has not been physically divided (meaning it remains in joint ownership of several heirs), each heir can sell their share, but not the entire apartment without the consent of co-owners.

If all heirs agree to sell the apartment as one unit, they can file a court request for approval of the sale even during the probate administration stage, provided it is financially beneficial and appropriate for the estate's benefit.

Legal Process: Main Steps

Selling an apartment by inheritance requires compliance with strict legal procedure. Below are the main steps:

• Probate administration (if not yet established): In the first stage, a case must be opened in the family court (if not already opened). In this case, all heirs and assets of the deceased will be declared. Only after the case is established can approval requests for sale be filed.
• Request for sale approval: If heirs wish to sell the apartment during the probate administration stage, a request must be submitted to the court with a declaration of heirs, consent of all heirs (if any exist), or proof that the sale is beneficial. The court reviews the request and approval is typically granted within weeks.
• Distribution of property: Following approval of the sale or typically after case closure, the property is distributed among the heirs according to law. If heirs wish to sell the apartment after distribution, they can do so without an additional court order (provided there is consent of all parties holding rights in the apartment).
• Sales contract and Tabu registration: When a buyer is found, a legal sales contract must be signed. The contract must include all terms, the purchase price, closing date, and all parties' obligations. After signing, the contract must be submitted to the Land Registry to update the Tabu.
• Deal closure: At closing, all taxes and expenses are paid (capital gains tax, attorney fees, Tabu update, etc.), and heirs receive the sale proceeds (after payment of estate debts).

How Long Does It Take to Sell an Apartment by Inheritance?

The duration depends on the stage of the case. Generally, the complete process — from probate administration through closing — can take between 4 months to one and a half years, depending on the court's workload, case complexity, and the property's condition. If the apartment is sold during the probate administration stage and all heirs agree, the process can be faster — approximately 2–4 months.

Taxes and Liabilities When Selling an Inherited Apartment

Selling an inherited apartment involves significant tax obligations. It is important to understand these obligations in advance to avoid surprises at closing.

Capital Gains Tax — The Primary Tax on Sale

Capital gains tax is the primary tax imposed by the state on profit from the sale of a property. Capital gains tax is levied on the difference between the original purchase price of the apartment and the sale price. However, in the case of inheritance, there is a significant benefit: upon the death of the property owner, the purchase price is updated to the fair market value on the date of death. This means that if an apartment was purchased in 1990 for 100,000 shekels and is worth 1,000,000 shekels today, capital gains tax will be calculated only on the gain from the date of death until the sale — not on the entire period from the original purchase.

If the apartment is sold at a value close to its value on the date of death, capital gains tax will be low or even zero. If the apartment appreciates significantly after the death, capital gains tax will be applied to that gain.

The capital gains tax rate varies depending on the type of property (residential apartment, shared building, land, etc.) and the holding period. Typically, for a residential apartment, the capital gains tax rate is in the range of 10%–35% of the profit, depending on the circumstances.

Purchase Tax (Duty)

Purchase tax (also called duty) is a tax paid by the buyer, not the seller (heirs). However, it is important to know that this tax affects the selling price, as buyers often try to lower their offered price because of purchase tax. The purchase tax rate is typically 5%–10% of the property value, depending on the property value and the buyer's status.

Estate Liabilities

Before heirs can receive the proceeds from the sale, estate liabilities must be paid — that is, any debt owed by the deceased at the time of death. This includes:

• Bank debts or secured loans on the apartment
• Tax debts (income tax, unpaid purchase tax, etc.)
• National insurance liabilities
• Liabilities to local authorities (municipality, water, electricity, etc.)
• Court and treasury expenses
• Attorney and trustee fees

These liabilities are collected from the sale proceeds before heirs receive their balance. Therefore, it is important to check in advance what the deceased's liabilities are to avoid surprises at closing.

Additional Expenses at Sale

• Attorney fees: The representing attorney charges fees for legal representation. Typically, this fee is a percentage of the sale value (usually 0.5%–1.5%), but it varies depending on the attorney and the complexity of the transaction.
• Land Registry update fees: Fees must be paid to the Land Registry office for updating the deed (usually a few hundred shekels).
• Real estate broker commissions (if applicable): If the apartment is sold through a real estate broker, a commission must be paid (usually 2%–3% of the sale value).
• Legal and technical inspections: Background checks on the property, legal and rights inspections, etc.

Common Mistakes to Avoid

During our years of experience representing heirs, we have repeatedly witnessed mistakes that could have been avoided with prior legal consultation. Below are the most common mistakes:

1. Selling Without Court Approval During Estate Administration

A serious mistake is attempting to sell an apartment while the case is still in estate administration without court approval. Such a sale is not legal, and a buyer may risk an invalid transaction. Additionally, the sale may be voidable if one of the heirs contests its validity. Court approval must always be obtained before selling at this stage.

2. Disagreement Among Heirs

If some heirs want to sell the apartment and others do not, this can lead to legal obstruction. If one heir objects to the sale, they can file a court petition to halt the process. Although a court may order a sale even without the consent of all heirs (if it is convinced this is in the estate's best interest), this significantly delays the process. It is preferable to try to reach an agreement among heirs before initiating the process.

3. Failure to Verify Estate Debts

Many heirs assume they will receive all sale proceeds, but often there are substantial estate debts that are deducted from the funds. If debts are not verified in advance, there can be a surprise at closing. It is important to obtain a debt report from the executor or an attorney before beginning the sale process.

4. Failure to Assess Capital Gains Tax

Some heirs do not understand the implications of capital gains tax. If an apartment has appreciated significantly after the death, capital gains tax can be substantial. It is important to calculate capital gains tax in advance so that heirs can decide whether the sale is worthwhile or if it is preferable to hold the apartment for a longer period.

5. Signing a Purchase Agreement Without Legal Consultation

A purchase agreement is an important legal document that sets forth all the terms of the transaction. Signing an agreement without legal consultation may lead to misunderstandings, additional expenses, or even legal disputes. The agreement should always be reviewed by an attorney before signing.

6. Failure to Report to Government Agencies

After a sale, the transaction must be reported to government agencies (Income Tax Authority, National Insurance Institute, municipality, etc.). Failure to report may result in penalties or legal investigations. A legal attorney typically handles this reporting, but it is important to ensure that it is done.

Comparison: Selling an Inherited Apartment vs. Regular Sale

Selling an inherited apartment has significant differences compared to a regular sale of an apartment owned by a living person. Below is a table comparing the two scenarios:

As can be seen, selling an inherited apartment is a more complex process compared to a regular sale. Therefore, it is important to obtain professional legal advice in advance.

Why Choose Mendelboim, Gor, Witzman-Gor & Co. Law Firm

Selling an apartment through inheritance is a complex legal process that requires deep knowledge of real estate law, tax law, inheritance law, and litigation. At Mendelboim, Gor, Witzman-Gor & Co. (Ramat Gan), we have extensive experience of over 18 years representing heirs in such processes.

Our experience includes:

• Court case management: We handle submissions for sales approval, management of family disputes, and representation before the family court.
• Comprehensive legal advice: We provide full legal consultation on selling an apartment through inheritance, including examination of estate debts, calculation of appreciation tax, and preparation of sales agreements.
• Representation during sale: We serve as legal intermediaries during the sale, ensuring that the transaction is lawful and all parties are protected.
• Personal and dedicated approach: We understand that selling an apartment through inheritance is an emotional and difficult process. We work carefully and compassionately to ease the process.
• Free initial consultation: We offer a free initial consultation so you can understand the matter and decide whether it is worthwhile for us to work together.

If you are an heir and are considering selling an apartment through inheritance, we are here to help. Contact our Ramat Gan office (Donesh 1) for a free initial consultation.