Legal Loophole Lets Beneficiaries Bypass Wills in Israeli Pension Funds
A little-known legal provision in Israeli inheritance law allows funds in pension and insurance accounts to bypass the deceased's will, causing disputes among heirs. Attorney Hila Dahan-Tubi explains that under Section 147 of the Inheritance Law, sums paid after death from insurance contracts or pension funds are excluded from the estate and paid directly to designated beneficiaries, regardless of the will's instructions. This rule aims to provide quick financial support to survivors without waiting for lengthy probate procedures or exposing funds to creditor claims.
Problems arise when a deceased person’s last-minute change of beneficiaries in a pension fund contradicts their will. Courts require explicit and specific testamentary instructions to override beneficiary designations, including naming the exact fund. Moreover, changes to beneficiaries must be formally registered with the fund during the person’s lifetime; otherwise, the fund pays the registered beneficiary. This has led to cases where heirs discover after the funeral that funds have been transferred to one sibling’s account, leaving others without inheritance.
While it is possible to challenge such beneficiary changes on grounds like undue influence or incapacity, legal action is complex and time-sensitive. Immediate court orders or injunctions are necessary to prevent funds from being withdrawn before the dispute is resolved. Additionally, life changes such as divorce require updating beneficiary designations to reflect current intentions, as funds will otherwise be paid to ex-spouses if still listed.
Attorney Dahan-Tubi advises that relying solely on a will is insufficient for pension and insurance assets. To avoid inheritance conflicts, individuals must proactively update beneficiary designations directly with their funds. This legal nuance highlights the importance of understanding how social and insurance monies are treated differently from other estate assets under Israeli law.
