Israel

Israeli law calls every fund or insurance plan approved under its section 13 a provident fund (kupat gemel),¹ and a pension fund is an old fund, a new general fund or a new comprehensive fund.² This block covers the new ones. A new comprehensive fund is an annuity fund first approved after 1 January 1995 whose deposits are a rate of insured pay no higher than the rules allow; a new general fund is any other pension fund first approved after that date.^3,4 The fund pays the pension itself, every month for life, under its rules.⁵

From 2008 contributions to pension savings have been compulsory for employees across the economy, apart from young employees and those in their first months of work, under framework accords that orders extended to every employer.⁶ Since 2017 the minimum has been 12.5% of pay, 6% from the employee and 6.5% from the employer, not counting severance money, and only on pay below the national average wage.⁷ An employee may choose any fund for these deposits.⁸ The employer takes the employee's share from pay and pays it in,⁹ and each account is split into the employee's savings, the employer's savings and severance money, with the employer reporting each deposit by component.^10,11

A foreign trust, on our reading: by statute the managing company is trustee of the fund's assets for the members.

A foreign trust, on our reading. No IRS guidance names an Israeli fund, and federal law, not Israel's label, decides.¹² Israeli law makes the managing company trustee of the assets of the funds it manages, for the members,¹³ with the care a skilled trustee would use,¹⁴ and it must hold each fund's assets apart from its own property.¹⁵ A member's rights cannot be transferred or pledged, and the fund's assets cannot be attached.^16,17 That is the pattern of a U.S. trust, whose trustees take title to protect and conserve property for the beneficiaries,¹⁸ and IRS advice lists "a trustee that has legal title and a legal duty to protect and conserve the assets for the designated beneficiaries" among a trust's elements.¹⁹ The IRS privately ruled a foreign pension fund whose members could not assign their interests a trust,²⁰ and Chief Counsel read Singapore's statutory fund, held in trust, as a §402(b) employees' trust.²¹

The strongest points against. A company that runs a pension fund must hold an insurer's license,²² and the fund pays pensions for life from the pool,⁵ so it works partly as an insurer, and the Code treats insurance companies as corporations.²³ But the entity in the IRS ruling existed to insure pensions, was supervised by the body that supervises insurance companies and pension funds, and paid benefits by formula, and it was still a trust,²⁴ so on our reading those features don't change the answer. An investment trust whose manager can vary the investments is not a trust,²⁵ but a pension fund exists to pay pensions under a lock, not to invest for profit. In a sector fund, open only to a defined group and run not for profit, at least half the managing company's directors are appointed by the members or their representative body,²⁶ which brings back the doubt that a trust's beneficiaries cannot share in running it;²⁷ the answers here stay the same.

Governed by Israeli law and run in Israel, the fund meets neither test for a domestic trust, so it is foreign.^28,29

A §402(b) employees' trust on our reading. Compulsory deposits withheld from pay count as the employer's; extra money is yours.

On our reading this is a §402(b) employees' trust: an employer pays in for its employees, and the IRS has ruled privately that a foreign fund with mandatory employer contributions and personal accounts is one.^30,31 A trust created outside the United States escapes §402(b) only if it would otherwise meet §401(a),^32,33 and on our reading nothing suggests an Israeli fund does.

Employer contributions are U.S. income to you when paid, to the extent vested,^30,34 and the foreign earned income exclusion cannot cover them.³⁵ You are not treated as owner of the part they fund.³⁶ Savings money vests as paid, on our reading. Severance money is different. It takes the place of severance pay only under a collective agreement or a minister's approval,³⁷ and under the general approval of 1998 the employer gives up in advance any right to take it back, unless a court denies severance or you withdraw it other than on death, disability or retirement at 60 or more.³⁸ A forfeiture only for cause is not a substantial risk of forfeiture,³⁹ so on our reading severance money under such an arrangement vests as paid. Without one, the employer can take severance money back once the job ends,⁴⁰ so it vests, and is U.S. income, only when that right ends.³⁴ No IRS guidance addresses Israeli severance money.

Compulsory money withheld from your pay counts as the employer's, on Chief Counsel advice on Singapore's fund, which is not precedent,⁴¹ so the compulsory 6% is the employer's in this count. Elective money is your own:⁴² what you choose to pay beyond the compulsory rate (the rules for approving a fund let an employee pay up to 7% of pay),⁴³ and anything you pay in without an employer. A rate your contract or collective agreement sets above the compulsory 6% is not settled, as for a study fund, and the cautious course counts it as yours.^41,42 Once your own total exceeds the employer's for you, you are treated as owner of the part it funds, if the grantor trust rules are otherwise met.⁴⁴ §679 does not apply to a §402(b) trust,⁴⁵ so that means §677: the income credited to your account is held for you.⁴⁶ The employer pays at least 6.5%, not counting severance money,⁷ so the compulsory deposits alone don't reach Part II.

Payouts are taxed under §72, with the employer money already taxed to you as basis, when they are paid or made available.^47,48,49 On Chief Counsel's reading money is made available when you could have it by giving notice,⁵⁰ unless taking it is subject to a substantial restriction.^51,52 Savings money is locked, as the exemption step shows. Severance money can be taken as a lump sum once you leave the job,^53,54 so on our reading it is made available from then on, whether or not you take it; that is not settled. If you are a highly compensated employee and one reason the plan is not exempt is that it fails the U.S. coverage tests, you include your vested balance, less what has already been taxed to you, in income each year.⁵⁵ Compulsory cover reaches only pay below the national average wage,⁷ so a plan for pay above that, such as an executive plan, may raise this rule.

Rev. Proc. 2020-17: possible, not settled. Severance money you can take on leaving a job is the open point.

Rev. Proc. 2020-17 exempts an eligible individual (one who has filed U.S. returns and reported the plan's income as U.S. law requires)⁵⁶ from Forms 3520 and 3520-A for a retirement trust that meets its conditions.⁵⁷ With no IRS guidance on Israeli funds, whether it covers one is not settled. A fund's size is not one of the conditions.

A pension fund points toward most of them. It is tax-favored: a provident fund's income is exempt unless it comes from a business the fund runs,^58,59 and employer deposits within the limits are taxed to the employee only when received.⁶⁰ Under the income tax regulations a fund files a yearly audited report with the Commissioner,⁶¹ and employers report each deposit by component,¹¹ but we found no yearly report on each member to the tax authority, so on our reading the reporting condition is met through the report on the fund and its words "otherwise available".⁶² Contributions follow pay: employer payments are equal monthly rates of salary,^63,64 and the employer's total for savings, severance and annuity is capped at 15.83% of pay,^65,66 though a self-employed member of a new general fund may pay in without limit, which leaves the earned-income and limit conditions open for that member.⁶⁷ An employer's plan must cover a wide range of employees, rank and file included,⁶⁸ and compulsory pension reaches employees across the economy with the exceptions above,⁶ which on our reading meets that part; that the plan gives significant, nondiscriminatory benefits to a substantial majority of them is not shown.⁶⁹

Payouts are the open point. They must wait for retirement age, disability or death, or carry a penalty.⁷⁰ Savings money in an annuity fund comes out only as a pension, or by turning part of it into a lump sum, except for listed reasons, the first being the health or finances of you or your spouse;⁷¹ an annuity fund pays from 60, on loss of capacity to work, or to survivors,⁷² and money paid out against the rules is taxed at a flat 35% even if you are otherwise exempt,⁷³ which on our reading is a penalty. Hardship is among the reasons Rev. Proc. 2020-17 accepts.⁷⁴ But severance money can be taken in cash on leaving a job,^53,54 exempt from Israeli tax up to a month's pay for each year of work, within a yearly cap,⁷⁵ with no penalty. Leaving a job is not among the examples. "Such as" is not a closed list, but the examples are needs, and a job change is not one. No IRS guidance answers this.

The proposed regulations, which you may rely on now if you apply them in full and consistently with related persons,⁷⁶ let a value test stand in for a contribution limit: at or under US$600,000 at every point in the year (adjusted for inflation from 2026), on our reading adding together all your trusts in Israel.⁷⁷ They allow for limited contributions by unemployed people,⁷⁸ but they don't help on payouts, where the text has the same words.⁷⁹ A trust that takes in a rollover keeps its status only if the sending trust also qualifies,⁸⁰ so money moved in from a study fund gets no help from that rule. Rev. Proc. 2020-17 §5.04 does not fit: it covers medical, disability and educational savings.⁸¹

No deferral: Article 20 is under the saving clause, and a lump sum is not a pension under the treaty.

No deferral. Article 20(1) makes private pensions taxable only in the country where you live,⁸² but the saving clause lets each country tax its residents and citizens as if the treaty had not come into effect,⁸³ and Article 20(1) is not among its exceptions: the 1993 Protocol added only Article 20(2) and (3).^84,85 Treasury says the same of Article 20.⁸⁶ So the United States taxes a U.S. citizen or resident on an Israeli pension. A "pension" there means periodic payments made by reason of retirement or death for past services,⁸⁷ so a lump sum is not one; the treaty has no article on other income, and on our reading Israel may tax a lump sum from an Israeli fund paid to a U.S. resident as income from a source in Israel.^88,89 No article defers U.S. tax on a fund's income or relieves contributions.

The United States credits Israeli tax, subject to the limits of U.S. law,⁹⁰ and for a U.S. citizen living in Israel the 1993 Protocol adds rules that treat some income as arising in Israel to avoid double tax.⁹¹ Watch the timing: the United States taxes employer money as it goes in, while Israel taxes employer deposits within the limits only when you receive them,^30,60 so the two can fall in different years. We did not read Israel's withholding on payouts to someone living abroad.

Treaty residence. A U.S. citizen or green card holder who is not a resident of Israel counts as a U.S. resident for the treaty only with a substantial presence, permanent home or habitual abode in the United States.^92,93 Someone resident in both countries is placed by a tie-breaker that starts with the permanent home, and an oleh, a new immigrant as section 35 of the Income Tax Ordinance defines one, has his center of vital interests deemed to be in Israel; the 1993 Protocol moved the cross-reference to section 35 when the Ordinance was renumbered.^94,95,96 A green card holder who is a resident of Israel under the tie-breaker is not subject to the saving clause, though a U.S. citizen stays subject to it.⁸³ Such a person can figure their U.S. tax as a nonresident, filing Form 1040-NR with Form 8833,^97,98 but is still treated as a U.S. resident for other purposes,^99,100 so the cautious course is to keep filing Forms 3520 and 3520-A unless you rely on the proposed regulations, which treat you as not a U.S. person for that time.^101,76 For a long-term resident, starting to be treated as resident abroad under a treaty ends lawful permanent residence for tax purposes, and that is an expatriation.^102,103

Disclosing a treaty position on Form 8833 is otherwise waived for pensions.¹⁰⁴ Nothing in the treaty touches Forms 3520 or 3520-A, and the IRS has said of Canadian plans that those forms still apply even where a treaty defers tax.¹⁰⁵ The treaty has no rule on moves between plans; Treasury officials told GAO few treaties address this.¹⁰⁶

No Part I; Part II and 3520-A once your own money passes the employer's; Part III for payouts and moves not reported as pay.

Read as a §402(b) trust: no Part I for any contribution, extra deposits included.¹⁰⁷ No Part II or Form 3520-A for the employer-funded part, compulsory money withheld from your pay included; once your own money exceeds your employer's, Part II and Form 3520-A each year for the part it funds.^36,44,108 No Part III for payouts from the employer-funded part that you report as compensation income;^109,110 payouts from a part you own go on Part III, lines 24 and 27.¹¹¹ A death benefit paid straight to a U.S. heir is a payout from a foreign trust on this reading, and since it is not settled whether an heir can report it as compensation income, the cautious course is to report it on Part III.^112,109 Money due to an heir can instead be moved to a new account in the heir's name that takes no more deposits, and money the heir leaves unclaimed for three months after the death is treated as moved there for Israeli tax.^113,114 How a U.S. heir reports such an account is not settled, and no IRS guidance addresses it; the heir funded none of it, and the cautious course reports the money moved into it on Part III, as for a death benefit, and what later comes out of it too.¹¹² No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules, and the income of a part you own is taxed to you each year.^47,115,116 If the fund does not file Form 3520-A, you attach a substitute to your Form 3520.¹¹⁷

Moves, on the cautious course, are shown going out on Part III unless you report them as compensation income, as the notes at the end of this guide explain.¹⁰⁹ Severance money you may take after a job ends, whether left in the fund or moved to a new account in your name, is read as the next block on provident funds says.^53,118 An amount made available to you, as the §402(b) step reads it, is received constructively, and line 24 covers what you receive actually or constructively, so on the cautious course it goes on Part III for the year it is made available unless you report it as compensation income; that, and whether it then counts as your own money for Part II, is not settled.^119,109,44 Money counted as made available in an earlier year and paid out later goes on Part III when it is paid, with a statement naming the year it was counted, whether or not it went on Part III that year: the count was a constructive receipt and the payout is the actual one, and line 24 covers what you receive actually or constructively, whether or not it is taxable; what was taxed when it was made available is basis by then, not compensation income you report, so the compensation exception does not take it off.^119,120,109 On the cautious course, a payout that mixes that money with growth or other money taxed only when it is paid goes on Part III in full, the part you report as compensation income included, since the exception covers a distribution you report as compensation income and part of this one is not.^119,109

An eligible individual whose plan qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them, and that is not settled.^57,76 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

Besides pension funds, an employer can pay into a provident fund for savings (kupat gemel l'chisachon), an annuity fund that is neither an insurance fund nor a pension fund,¹²³ which invests each member's account and pays or buys a pension. Older tagmulim funds and personal severance funds take no money for tax years from 2008, but still hold money paid in before then.¹²⁴ Tagmulim money pays out at 60 once five years have passed since the first deposit,¹²⁵ and severance money once you leave the job.⁵⁴ A personally managed fund is one of these approved for a single member who may give instructions on investing the money;¹²⁶ one written as an insurance plan is governed by the rule for insurers and takes the managers' insurance answers.¹²⁷

A foreign trust, on our reading, as for a new pension fund; each member has an account in a fund the trustee invests.

A foreign trust, on our reading, as for a new pension fund. The same statute makes the managing company trustee of the fund's assets for the members,¹³ and each member has an account in a fund the trustee invests. A fund that was a corporation when the law took effect had to become a fund managed in trust by a managing company,¹²⁸ though one that was a cooperative society may stay one and counts as its own managing company;¹²⁹ its members are members of a cooperative, so on our reading its case is no stronger than a pension fund's, and these answers are the cautious course for it too.²⁷

A personally managed fund goes further than the fund in the IRS ruling on investment choice, whose members chose from options the trustee selected,¹³⁰ because here the member gives investment instructions;¹²⁶ on our reading that does not change the answer, but no IRS guidance says so. The strongest authority against is the rule that an investment trust whose manager can vary the investments is not a trust,²⁵ answered as for a pension fund: these funds exist to pay pensions, or severance on leaving a job, not to invest for profit. Governed by Israeli law and run in Israel, the fund is foreign.^28,29

As for a new pension fund. Money you can take whenever you choose after a job ends is made available, on our reading.

As for a new pension fund: an employees' trust on our reading,^30,31 with employer money U.S. income when vested,³⁴ and severance money vesting as that block explains.^38,39 Compulsory money withheld from pay counts as the employer's, and elective money is yours.^41,42 Once your own total exceeds the employer's, you are treated as owner of the part it funds, if the grantor trust rules are otherwise met.^44,46

Money you can take at any time after a job ends. Once you may withdraw money from a tagmulim fund or a personal severance fund, you can, if the fund agrees, leave it there and draw on it whenever you choose, with no more deposits, or move all of it to an account as an independent member;¹³¹ and severance money in an annuity fund can move, after Israeli tax, to a new account in your name that takes no more deposits.¹¹⁸ Tagmulim money paid in before 2005 can also be paid out if you leave a job by dismissal or resignation and don't start another within six months.¹³² On our reading money you can take whenever you choose is made available, and so taxed under §402(b)(2) in the year it becomes available, whether or not you take it.^47,50 That is not settled, and no IRS guidance addresses Israeli funds.

Rev. Proc. 2020-17: possible, not settled. Tagmulim money pays at 60, but severance money pays on leaving a job.

As for a new pension fund, whether Rev. Proc. 2020-17 covers one is not settled.^56,57 Tagmulim money pays at 60 after five years,¹²⁵ a retirement age. But money paid in before 2005 can also come out if you leave a job by dismissal or resignation and don't start another within six months,¹³² and severance money comes out on leaving a job,⁵⁴ and neither is among Rev. Proc. 2020-17's examples.⁷⁴ Money you can draw on whenever you choose after a job ends has no restriction at all.¹³¹ So payouts are open,⁷⁰ and the proposed regulations don't help there, since their text has the same words.⁷⁹

As for a new pension fund: no deferral, and the saving clause keeps U.S. tax.

As for a new pension fund: no deferral. Article 20(1) is under the saving clause, so the United States taxes a U.S. citizen or resident on the payouts,^82,83,84 and a lump sum is not a periodic pension under the treaty.⁸⁷

As for a new pension fund; on the cautious course, money moved into your name after a job ends takes Part I, Part II and 3520-A.

Read as a §402(b) trust: no Part I for any contribution.¹⁰⁷ No Part II or Form 3520-A for the employer-funded part, compulsory money withheld from your pay included; once your own money exceeds your employer's, Part II and Form 3520-A each year for the part it funds.^36,44,108 No Part III for payouts from the employer-funded part that you report as compensation income;^109,110 payouts from a part you own go on Part III, lines 24 and 27.¹¹¹ A death benefit paid straight to a U.S. heir goes on Part III on the cautious course.¹¹² Money due to an heir can instead be moved to a new account in the heir's name that takes no more deposits, and money the heir leaves unclaimed for three months after the death is treated as moved there for Israeli tax.^113,114 How a U.S. heir reports such an account is not settled, and no IRS guidance addresses it; the heir funded none of it, and the cautious course reports the money moved into it on Part III, as for a death benefit, and what later comes out of it too.¹¹² No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules.^47,115 If the fund does not file Form 3520-A, you attach a substitute to your Form 3520.¹¹⁷

Money moved after a job ends, on the cautious course. Once money you may draw on whenever you choose is moved to an independent member's account or to a new account in your name that takes no more deposits, you are treated as owner of that account: Part II and Form 3520-A each year on its whole balance, and its payouts on Part III, lines 24 and 27.^{131,118,46,108,111} That may overstate what you own; on the other reading the money keeps its mix of your employer's and your own.⁴⁴ On the cautious course the money going in is your transfer, so it goes on Part I for the year of the move while you are a U.S. person, as the notes on moves at the end of this guide say, and the money going out goes on Part III unless you report it as compensation income.^133,109 This reads the new account on its own even where it is in the same fund, unlike the whole-fund count in the self-employed block; that is the cautious course, and it is not settled.⁴⁴ No IRS guidance addresses this. On the same cautious course, which is not settled either, Part I also applies at your death as a U.S. citizen or resident, if any part of that account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.^134,107

Severance money from which Israeli tax was taken, and which you leave in the fund, is treated for Israeli tax as moved to such a new account three months later,¹³⁵ so the cautious course reads it the same way. Other money you may draw on whenever you choose but leave in place stays in the fund's mix on our reading; that is not settled.^131,44 An amount made available to you, as the §402(b) step reads it, is received constructively, and line 24 covers what you receive actually or constructively, so on the cautious course it goes on Part III for the year it is made available unless you report it as compensation income; that, and whether it then counts as your own money for Part II, is not settled.^119,109,44 Money counted as made available in an earlier year and paid out later goes on Part III when it is paid, with a statement naming the year it was counted, whether or not it went on Part III that year: the count was a constructive receipt and the payout is the actual one, and line 24 covers what you receive actually or constructively, whether or not it is taxable; what was taxed when it was made available is basis by then, not compensation income you report, so the compensation exception does not take it off.^119,120,109 On the cautious course, a payout that mixes that money with growth or other money taxed only when it is paid goes on Part III in full, the part you report as compensation income included, since the exception covers a distribution you report as compensation income and part of this one is not.^119,109

An eligible individual whose plan qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them, and that is not settled.^57,76 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^136,137,138 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹³⁹ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

A study fund (keren hishtalmut) is a provident fund for paying study money to employees, the self-employed, kibbutz and cooperative members or their beneficiaries.¹⁴⁰ Employer payments within the limits of a collective agreement, and no more than 7.5% of pay (8.4% for a teacher), are taxed to the employee only when received; payments above those limits are taxed as pay when made.¹⁴¹ The fund's approval covers the employer's money only if the employee also pays in at least a third of what the employer pays.¹⁴² Withdrawals of the tax-favored deposits and their earnings are free of Israeli tax once six years have passed since the first payment, or three years for someone at retirement age or for money used for study.¹⁴³

A foreign trust, on our reading, as for a pension fund: by statute the managing company is trustee for the members.

A foreign trust, on our reading, as for a new pension fund: the same statute makes the managing company trustee for the members,¹³ with the same duties and the same bar on transferring a member's rights.^14,16 No IRS guidance names an Israeli study fund. The strongest point against is that after six years the money is free for any use,¹⁴³ so the fund then works much like a pooled investment account, and an investment trust whose manager can vary the investments is not a trust;²⁵ but the fund's statutory purpose is study money,¹⁴⁰ and the same trustee holds it. A sector fund brings back the doubt that beneficiaries cannot share in running a trust,^26,27 with the same answers. Governed by Israeli law and run in Israel, it is foreign.^28,29

A §402(b) employees' trust on our reading, not settled. After six years the balance may be U.S. income: not settled either.

Not settled; on our reading, a §402(b) employees' trust. §402(b) taxes an employer's contributions to an employees' trust,³⁰ and the regulations speak of contributions made on an employee's behalf by an employer to such a trust;¹⁴⁴ neither limits it to a retirement plan. Chief Counsel applied §402(b) to Singapore's statutory fund, read as held in trust, although by then its money could be used for a wide variety of purposes, housing, investments and college education among them.^21,145 That is advice, not precedent, and the strongest point against is that Singapore's fund was still mainly a retirement fund, while Rev. Proc. 2020-17 treats savings trusts for education as a class of their own.¹⁴⁶ If a study fund is not described in §402(b), the Part I exception does not reach it,¹⁰⁷ and the cautious course would be to report it as a foreign trust you own.

The employer's payments are U.S. income to you when vested.^30,34 A fund may not return money to the employer once you could take it out free of Israeli tax,¹⁴⁷ which implies a return may be possible before then if your contract allows one. On our reading the money vests as paid where your contract gives the employer no right to take it back, and otherwise when that right ends. Check your agreement; no IRS guidance addresses it. Whether a share a contract requires you to pay counts as the employer's, as compulsory money does, is not settled, so the cautious course counts your own payments as yours.^41,42 The share that keeps the Israeli exemption is a third of the employer's or 2.5% of pay,¹⁴⁸ so if you pay only a third of the employer's payment, your money stays below the employer's; if you pay 2.5% of pay, it does too unless the employer pays less than that.⁴⁴

From the sixth year, when everything can come out and the tax-favored part is free of Israeli tax, the earnings not yet taxed may be U.S. income each year whether or not you take them, though the rule closing the account to new money once you take any may be a restriction that prevents it; that is not settled, so have an adviser look at it.^{143,50,47,149,51}

None, on our reading: after six years everything can come out for any use, so the payout condition fails.

None, on our reading. Rev. Proc. 2020-17 §5.03 covers retirement trusts,⁵⁷ and a study fund is not one. §5.04 covers savings trusts for educational benefits,⁸¹ and a study fund's statutory purpose fits,¹⁴⁰ but its payouts must be conditioned on providing those benefits, or carry a penalty,¹⁵⁰ and after six years, or three at retirement age, everything can come out for any use, the tax-favored part free of Israeli tax.¹⁴³ Its contribution limit is open too: §5.04 needs $10,000 a year or $200,000 in all,¹⁵¹ and an employer may pay more than the tax-favored share, taxed as pay.¹⁴¹ The proposed regulations' category for these savings trusts has the same payout words.¹⁵² The FATCA agreement lists study fund accounts apart from retirement accounts, for bank reporting only.¹⁵³

No relief: a study fund payout is not a pension under the treaty, and Israel doesn't tax its tax-favored part after six years.

No relief. A "pension" under Article 20 means periodic payments by reason of retirement or death for past services,⁸⁷ and a study fund payout is neither, so the United States taxes a U.S. citizen or resident on it under its own law.⁸³ Israel does not tax the tax-favored part after six years,¹⁴³ so on that part there is no Israeli tax to credit.⁹⁰

No Part I; Part II and 3520-A once your own money passes the employer's; Part III for payouts not reported as compensation.

Read as a §402(b) trust: no Part I for any contribution.¹⁰⁷ No Part II or Form 3520-A for the employer-funded part; once your own money exceeds your employer's, Part II and Form 3520-A each year for the part it funds.^36,44,108 No Part III for payouts you report as compensation income;^109,110 payouts from a part you own go on Part III, lines 24 and 27, and on the cautious course so does a payout you don't report as compensation.^111,112 A death benefit paid to a U.S. heir goes on Part III on the cautious course.¹¹² No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules.^47,115 If the fund does not file Form 3520-A for a part you own, you attach a substitute to your Form 3520.¹¹⁷

If a study fund is not described in §402(b), the cautious course is the full reporting of a foreign trust you own: Part I for each payment you make as a U.S. person, Part II and Form 3520-A each year, and Part III for payouts.^{133,46,108,112} Part I also applies at your death as a U.S. citizen or resident, if any part of the fund is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹³⁴ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

Old pension funds are annuity funds first approved before 1 January 1995.¹⁵⁴ They were defined benefit funds, paying a pension set by years of saving and insured pay; they were closed to new members, and in 2003 the state took them over, cutting entitlements somewhat, raising members' contributions and funding some of the funds' actuarial deficits from the state budget.¹⁵⁵

A foreign trust, on our reading, as for a new pension fund, though the state now funds part of its deficit.

A foreign trust, on our reading, as for a new pension fund: an old fund is a provident fund under the same trustee rule.^154,13 The strongest point against is that the state now funds part of the deficit,¹⁵⁵ so members' claims rest partly on the state budget, not only on property held for them; but the fund still holds and invests its assets for its members, and the IRS ruled a pension entity paying benefits by formula a trust.²⁴ Governed by Israeli law and run in Israel, it is foreign.^28,29

As for a new pension fund. In a pool that pays pensions by formula, whether a part you fund is yours is not settled.

As for a new pension fund, a §402(b) employees' trust on our reading: the employer's contributions are U.S. income when vested, and you are not treated as owner of the part they fund.^30,34,36 Once your own money exceeds the employer's for you, you are treated as owner of the part it funds if the grantor trust rules are otherwise met,⁴⁴ and in a pool that pays pensions by formula, whether its income is held for you is not settled.⁴⁶ Payouts are taxed under §72.⁴⁷

As for a new pension fund: possible, not settled.

As for a new pension fund, whether Rev. Proc. 2020-17 covers one is not settled.⁵⁷ An old fund pays a pension at retirement age, on loss of capacity to work, or to survivors,⁷² and its severance money comes out on leaving a job, the same open point.^53,70

As for a new pension fund: no deferral, and the saving clause keeps U.S. tax.

As for a new pension fund: no deferral, and the saving clause keeps U.S. tax on a U.S. citizen or resident.^82,83

No Part I; Part II and 3520-A once your own money passes the employer's; Part III for payouts not reported as compensation.

Read as a §402(b) trust: no Part I.¹⁰⁷ No Part II or Form 3520-A for the employer-funded part; once your own money exceeds your employer's, Part II and Form 3520-A each year for the part it funds, though in a pool that pays by formula whether that part is yours is not settled.^36,44,108 No Part III for payouts you report as compensation income;¹⁰⁹ payouts from a part you own go on Part III, lines 24 and 27.¹¹¹ A death benefit paid straight to a U.S. heir goes on Part III on the cautious course.¹¹² Money due to an heir can instead be moved to a new account in the heir's name that takes no more deposits, and money the heir leaves unclaimed for three months after the death is treated as moved there for Israeli tax.^113,114 How a U.S. heir reports such an account is not settled, and no IRS guidance addresses it; the heir funded none of it, and the cautious course reports the money moved into it on Part III, as for a death benefit, and what later comes out of it too.¹¹² No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules.^47,115 An eligible individual whose plan qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them, and that is not settled.^57,76 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

An insurance fund is an insurance plan approved as a provident fund for savings, severance or annuity.¹⁵⁶ Managers' insurance is the best known: a policy that includes an annuity option, into which an employer can pay in place of severance pay under the 1998 general approval, as into a pension fund.¹⁵⁷

Not a trust: the law doesn't make the insurer trustee of the assets or make it hold them apart, as it does a managing company.

Not a trust, on its legal form. Israeli law makes a managing company trustee of a fund's assets for the members,¹³ but for an insurance fund and the insurer running it the law applies only listed sections, and section 3(a) is not among them; nor is section 27, which makes a managing company hold a fund's assets apart from its own.^158,15 The law as first published in 2005 left them out too.¹⁵⁹ The insurer holds its own assets and owes you a policy. The Code treats insurance companies as corporations,²³ and a policy is not property that trustees hold for beneficiaries.¹⁸

The strongest points against: the law does apply to insurers the duty of loyalty and a skilled trustee's care, the bar on transferring or pledging a member's rights and the bar on attaching fund assets,^158,14,16,17 which are features the IRS relied on when it ruled a foreign pension fund a trust.²⁴ But none of them puts title in a trustee for the members. A personally managed fund written as an insurance plan is the same: its own rule also leaves out sections 3(a) and 27.¹²⁷ We did not read a real policy, or the rules on how insurers keep the assets behind profit-sharing policies; the law's own exception decides it.

Applies only to a trust. Your employer's premiums for the policy can still be U.S. income to you under §403(c).

§402(b) reaches an employer's contributions to an employees' trust,³⁰ and on its legal form this is a policy, not a trust. An employer's premiums for an annuity contract outside a U.S. qualified plan are your income under §83,¹⁶⁰ so they are U.S. income when your rights vest, and the foreign earned income exclusion cannot cover them.¹⁶¹ A policy's cash value counts as property for that rule, apart from current life insurance protection.¹⁶² Severance money paid into a policy under the 1998 general approval vests as it does in a pension fund.^38,39

Not needed.

§6048 reaches only foreign trusts.¹³³

No relief: an annuity your employer paid for is a pension under Article 20(1), which the saving clause leaves taxable.

No relief. An annuity in the treaty's sense is bought for adequate and full consideration other than services,¹⁶³ so a pension from a policy your employer paid for as pay is a pension under Article 20(1),⁸² which the saving clause leaves the United States free to tax.⁸³ The 1993 Protocol spared Article 20(2) from the saving clause, but Treasury describes what it added as the source country's exemption of annuities,¹⁶⁴ so on our reading it gives nothing against U.S. tax on an Israeli annuity paid to a U.S. citizen or resident.

Nothing on Form 3520 or 3520-A.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts, and on its legal form this is a policy with an insurer.^133,108,112 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

A central fund is a provident fund whose members are only employers, or kibbutzim and cooperative villages.¹⁶⁵ A central severance fund holds an employer's money for its severance duty and takes no money for tax years from 2011,¹⁶⁶ and a central fund for budgetary pensions helps an employer pay the pensions it owes its employees.¹⁶⁷ Only the employer pays in.

A trust, on our reading, but one held for its member, the employer; you have no account in it.

A trust, on our reading, held for its member, the employer: the managing company is trustee of the fund's assets for the members,¹³ and here the members are employers.¹⁶⁵ You have no account; what you get is severance pay or a pension from your employer. Governed by Israeli law and run in Israel, it is foreign.^28,29

Not settled whether the employer's set-aside is U.S. income to you before you are paid; you are not its owner.

Not settled, and no IRS guidance addresses it. §402(b) reaches an employer's contributions to an employees' trust once your interest is vested,^30,34 and a beneficial interest in assets set aside from the employer's creditors, for example in a trust, counts as property.¹⁶⁸ Here the money is held for the employer, not in an account for you, so on our reading it is not yet yours; whether any part is U.S. income to you before you are paid is not settled. You are not treated as owner of any part of it.³⁶ On our reading the employer is its owner, because the limit on foreign owners does not apply to a compensatory trust.¹¹⁰

You are unlikely to need one: you transfer nothing and own nothing.

If the fund pays you and you don't report the payment as compensation, Rev. Proc. 2020-17 would apply only to a retirement trust meeting its conditions,⁵⁷ and a severance fund pays on leaving a job, not at retirement.⁷⁰

No relief: severance paid in a lump sum is not a pension under the treaty, and the saving clause keeps U.S. tax.

No relief. Severance paid as a lump sum is not a pension under Article 20,⁸⁷ and a pension the fund pays is one, under the saving clause.^82,83

No Part I or Part II; Part III only if the fund itself pays you and you don't report it as compensation.

No Part I: you transfer nothing to the fund, and transfers to a §402(b) trust are excepted.¹⁰⁷ No Part II or Form 3520-A: you are not its owner.³⁶ Part III only if the fund itself pays you and you do not report the payment as compensation income;^112,109 when the employer pays, nothing comes from the trust. No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules.^47,115 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

A budgetary pension is paid on retirement, every month for life, by law or agreement, from the State Treasury or from the employer's own coffers.¹⁶⁹ Deductions are taken from the pay of employees in this arrangement, but they do not build up in a pension fund,¹⁷⁰ and no new employees have been allowed to join it since 2004.¹⁷¹

Not a trust: there is no fund; the state or the employer pays from its own coffers.

Not a trust. A trust needs trustees who take title to property to protect or conserve it for the beneficiaries,¹⁸ and here nothing is set aside: the pension is paid from the Treasury or the employer's coffers.^169,170 An employer that uses a central fund to help pay these pensions is covered by the central funds block.¹⁶⁷

Does not apply: there is no trust to contribute to.

§402(b) reaches an employer's contributions to an employees' trust,³⁰ and there is none. A promise with nothing set aside for you is not property under the rules for property transferred for services.¹⁶⁸

Not needed.

§6048 reaches only foreign trusts.¹³³

Article 22 can exempt a government pension, but not for a U.S. citizen or green card holder.

Pay and pensions from Israel's public funds for government service are exempt from U.S. tax when paid to an Israeli citizen,¹⁷² and since 1993 public funds include local authorities and wholly owned government corporations with governmental functions;¹⁷³ but the saving clause keeps that benefit from anyone who is a U.S. citizen or has immigrant status in the United States.¹⁷⁴ A pension from an employer that is not the government falls under Article 20, also under the saving clause.^82,83

Nothing on Form 3520 or 3520-A.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts, and a budgetary pension has none.^133,108,112 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

The National Insurance Institute collects contributions from residents and pays benefits to those entitled, and its old-age insurance is meant to give residents of Israel a regular monthly income in old age.¹⁷⁵

Not a trust: a statutory insurance scheme with no account held for you.

Not a trust. A trust needs trustees holding property for the beneficiaries,¹⁸ and this is a statutory scheme that collects contributions and pays benefits to those entitled,¹⁷⁵ with no account held for any member.

Does not apply: there is no trust to contribute to.

§402(b) reaches an employer's contributions to an employees' trust,³⁰ and this scheme has no trust.¹⁷⁵

Not needed.

§6048 reaches only foreign trusts.¹³³

Paid to someone who lives in the United States, it is exempt from U.S. tax, citizens included.

Social security payments and other public pensions paid by one country to a resident of the other are exempt from tax in both,¹⁷⁶ and the saving clause does not apply to this article,⁸⁴ so Treasury says the exemption applies even to a citizen.¹⁷⁷ A U.S. citizen or green card holder who is not a resident of Israel is a U.S. resident for the treaty only with a substantial presence, permanent home or habitual abode in the United States,⁹² so one living in a third country gets no exemption. A U.S. citizen living in Israel, and resident there under the treaty, does not meet the article's condition of living in the other country, so on our reading the United States taxes the benefit: the IRS says foreign social security is taxable as an annuity unless a treaty exempts it.¹⁷⁸ The same article works the other way: U.S. social security paid to a U.S. citizen who is a resident of Israel is exempt from U.S. tax, and the IRS lists Israel among the countries where that holds.^176,179

No agreement on social security contributions with Israel is on the Social Security Administration's list, so a U.S. citizen working in Israel can owe both countries' social taxes.¹⁸⁰

Nothing on Form 3520 or 3520-A.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts, and this scheme is not one.^133,108,112 Form 8938 does not count a foreign government's social security.¹⁸¹ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

A member who pays in for themselves is an independent member, and that includes an employee who pays in with no matching payment from the employer.¹⁸² Since 1 January 2017, when a law of 2016 took effect,¹⁸³ a self-employed person must pay into an annuity fund 4.45% of income up to half the average wage and 12.55% of the part above, up to the average wage,¹⁸⁴ except those under 21, those at early retirement age, those in their first six months in business, and those who were 55 when it took effect.¹⁸⁵ A third of each payment, up to a yearly cap, is set aside as an unemployment savings component,¹⁸⁶ to be taken out if you close your business or stop working in your occupation.¹⁸⁷ The self-employed can also have a study fund if they have income from a business or profession.¹⁸⁸

A foreign trust, on our reading, as for an employee in the same kind of fund.

A foreign trust, on our reading, as for an employee in the same fund: the managing company is trustee of the assets for the members,¹³ and governed by Israeli law and run in Israel, the fund is foreign.^28,29 An investment provident fund, which takes money from independent members for a capital sum, has its own block below.¹⁸⁹

No employer pays in for you, so §402(b) taxes nothing to you; the Part I exception may still reach a fund with employees.

§402(b) reaches an employer's contributions,³⁰ and no employer pays in for you. But the exception to Part I tests the trust, not the member: it covers a trust described in §402(b),¹⁰⁷ and the compensatory-trust regulation speaks of a nonexempt employees' trust "including a trust created on behalf of a self-employed individual".¹⁹⁰ So in a fund with employer-funded members Part I may not be due. No IRS guidance says whether a member with no employer money is within an employees' trust, so the cautious course reports each payment;¹³³ a missed Part I can cost the greater of $10,000 or 35% of it, capped at the amount.¹⁹¹

Either way you are treated as owner of what you fund: your own money exceeds any employer's for you,⁴⁴ and the income credited to your account is held for you.⁴⁶ If an employer has also paid into the same fund for you, read the employer blocks: an account's components are kept apart,¹⁹² but the count of your money against the employer's runs on your contributions to the trust as a whole, so this guide does not split one fund into parts.⁴⁴

Possible, not settled: payouts are open, since you can take part of the money on closing your business.

As for a new pension fund, whether Rev. Proc. 2020-17 covers one is not settled.^56,57 The employer condition does not apply where no employer pays in.⁶⁸ Deposits to a new comprehensive fund are tied to income and capped,^193,64 but in a new general fund a self-employed member may pay in without limit, which leaves the earned-income and limit conditions open.^67,66 Payouts are open too: a self-employed member in a state of unemployment, which includes closing the business or no longer working in the occupation, may take money from an annuity fund as a lump sum, within limits,^194,187 and closing a business is not retirement, disability or death, and not plainly hardship.^70,74 The proposed regulations allow for limited contributions by unemployed people, which is about money in, not payouts,⁷⁸ and let a value test stand in for a limit, on our reading adding together all your trusts in Israel.⁷⁷ A study fund you pay into alone fails, as for an employee.¹⁵⁰

No deferral: Article 20(4) reaches a self-employed plan, but the saving clause keeps U.S. tax.

No deferral. Article 20(4) counts as a pension a payment under a plan for the self-employed whose contributions get special tax treatment,¹⁹⁵ but the saving clause keeps U.S. tax on a U.S. citizen or resident,^83,84 and a lump sum is not a periodic payment. The rest is as for a new pension fund, the treaty residence rules included.^92,94

On the cautious course, full reporting: Part I for each payment, Part II and Form 3520-A each year, Part III for payouts.

On the cautious course, you are treated as owner of what you fund, because your own money exceeds any employer's for you and its income is held for you.^44,46 Part II and Form 3520-A are due each year,¹⁰⁸ and payouts go on Part III, lines 24 and 27, as payouts to an owner.^112,111 On the cautious course each payment you make as a U.S. person is a Part I transfer,¹³³ and one made within 5 years before your U.S. residency started goes on Part I for that year,¹⁹⁶ though in a fund with employer-funded members the exception may reach it, as the §402(b) step says.¹⁰⁷ On the same cautious course, Part I also applies at your death as a U.S. citizen or resident, if any part of the fund is then treated as owned by you or is in your gross estate, unless the exception for a §402(b) trust reaches the fund, as it may: your executor reports it, whether or not the executor is a U.S. person.^134,107 If the fund does not file Form 3520-A, you attach a substitute to your Form 3520.¹¹⁷ No Form 4970, because the income is taxed to you each year.¹¹⁶

A death benefit paid straight to a U.S. beneficiary is a payout from a foreign trust on this reading, and the cautious course is to report it on Part III.¹¹² If the saver was not a U.S. person, no U.S. owner was taxed on the income, so the reason above for no Form 4970 does not reach that beneficiary: whether the payment can carry out income kept in earlier years is not settled, and no IRS guidance addresses it.¹⁹⁷

If an employer has paid into the same fund for you, the employer blocks apply instead.⁴⁴ An eligible individual whose plan qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them, and that is not settled.^57,76 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^136,137,138 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹³⁹ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

An investment provident fund is a provident fund for paying a capital sum to an independent member or the member's beneficiaries.¹⁸⁹ A member may pay in no more than 70,000 shekels a year across all such funds, indexed each year.¹⁹⁸ Interest and other gains you withdraw are taxed in Israel as interest income.¹⁹⁹ The law's bar on lump sums covers only annuity funds,⁷¹ and we found no other lock; each fund's rules, which we could not read, set how you withdraw.

Not a trust, on our reading: a pooled investment fund whose manager varies the investments, with no lock.

Not a trust, on our reading. An investment trust whose manager can vary the investments is not classified as a trust,²⁵ and IRS advice asks whether an arrangement was created primarily to protect and conserve property or for commercial purposes.²⁰⁰ This fund exists to pay a capital sum,¹⁸⁹ the managing company invests the pool, and nothing locks the money: the facts of a mutual fund, whose assets are also vested by statute in a trustee company, as the mutual funds block below explains.²⁰¹ As a foreign entity it is treated as a corporation if all its members have limited liability, unless it elects otherwise.²⁰²

The strongest point against: the Provident Funds Law makes the managing company trustee of the fund's assets for the members,¹³ and the IRS ruled a fund with member investment choice a trust.¹³⁰ But that fund had a retirement purpose, and the local label does not decide.¹² If it were a trust, it would be a foreign trust you own, reported in full.⁴⁶

Does not apply: no employer pays in, and on our reading there is no trust.

§402(b) reaches an employer's contributions to an employees' trust,³⁰ and no employer pays in: only an independent member can belong.¹⁸⁹

Not needed on our reading; it would not qualify anyway, since it pays a capital sum for any use.

Not needed on our reading: §6048 reaches only foreign trusts.¹³³ It would not qualify anyway: Rev. Proc. 2020-17 covers retirement trusts and medical, disability or educational savings trusts,¹⁴⁶ and this fund pays a capital sum for any use.¹⁸⁹

No relief: a withdrawal is not a pension.

No relief. A withdrawal is not a periodic pension under Article 20,⁸⁷ and the saving clause keeps U.S. tax on a U.S. citizen or resident.⁸³

Nothing on Form 3520 or 3520-A.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: on our reading the fund is a business entity, and Forms 3520 and 3520-A report foreign trusts.^133,108,112 The PFIC rules may apply to the fund or what it holds; this site does not determine that. If the fund were a trust, the cautious course would be full reporting, as for a fund you pay into alone.⁴⁶ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

For every child for whom child allowance is paid, the National Insurance Institute pays a monthly sum into long-term savings, 50 shekels as enacted and indexed since, with further sums at ages 3 and 13 (12 for a girl).²⁰³ A parent may choose to have the Institute add a further monthly sum from the child allowance, which the Institute describes as doubling the savings.^204,205 The money is the child's, but it is saved in a trust account for the child, with the parent who receives the allowance as trustee.²⁰⁶ It cannot be transferred, pledged or attached,²⁰⁷ and it is kept at a bank or in an investment provident fund, the fund if the parent makes no choice within six months of the birth.^208,209 The child can take it only at 18, with a parent's signature, and a grant is added at 21 if it is left in;²¹⁰ it can come out earlier only to pay for a medical need.²¹¹ Israel does not count it as income,²¹² and the National Insurance Institute says 84% of active plans were in provident funds at the end of 2025.²¹³

Not settled: by statute a trust account with the parent as trustee, though the money is the child's. Cautious: a trust.

Not settled, and no IRS guidance addresses it. The statute puts the money, by either route, in a trust account with the parent as trustee;²⁰⁶ the bank or the investment provident fund is only where the account is kept.²⁰⁸ A trustee holds the money for the child, it is locked to 18, and it cannot be transferred, pledged or attached,^210,207 which is the pattern of a U.S. trust.¹⁸ The strongest point against: the statute says the money is the child's,²⁰⁶ which reads like a custodianship for a minor. That is an argument, not legal form or IRS advice, and title is in the parent as trustee; federal law decides.¹² With the question open and the penalty for a missing Form 3520-A large,²¹⁴ this guide takes the cautious course of reading it as a trust, and a foreign one.^28,29 By the provident fund route the account holds an interest in an investment provident fund, which this guide reads as a business entity, so the PFIC rules may apply to it; this site does not determine that.²⁵

Does not apply: no employer pays in. Who owns each part turns on who paid it in.

§402(b) reaches only an employer's contributions to an employees' trust,³⁰ and no employer pays in. Who owns each part turns on who paid it in. The Institute is a foreign government body, not a U.S. person, and a foreign grantor is treated as owner only in narrow cases that don't fit here, so no one is treated as owner of the part it funds.²¹⁵ Money a parent adds from the child allowance is the parent's transfer, and a U.S. person who transfers property to a foreign trust with a U.S. beneficiary is treated as owner of that part.⁴⁵ Whether the Institute's deposit is income to the child when made is a separate question: it is not based on need, so the general welfare exclusion is doubtful, and that is not settled.²¹⁶

None: it is not a retirement, medical, disability or educational trust.

None. Rev. Proc. 2020-17 covers only retirement trusts and medical, disability, or educational savings trusts,¹⁴⁶ and this money comes out at 18 for any use.²¹⁰ The proposed regulations' category for savings trusts worth $50,000 or less is not relied on here, because the rule that grants the exemption lists only the other two.¹³⁸

No relief.

The treaty does not touch foreign trust reporting, and the saving clause lets the United States tax its citizens and residents as if the treaty had not come into effect.⁸³

A U.S. parent who adds money: Part I; Part II and 3520-A while the child is a U.S. person. A U.S. child: Part III and maybe 4970.

On the cautious course, read as a foreign trust: a U.S. parent who adds money from the child allowance makes a Part I transfer for each year's additions,¹³³ and, while the child is a U.S. person, is treated as owner of the part that money funds, so Part II and Form 3520-A are due each year for it.^45,108 Part I also applies on the death of a parent who is a U.S. citizen or resident, if any part of the account is then treated as owned by them or is in their gross estate: the executor reports it, whether or not the executor is a U.S. person.¹³⁴ The trustee is the parent, not the bank or the fund, so no one else will file Form 3520-A: a U.S. parent who is owner of part of it files it, or attaches a substitute to their Form 3520.^206,117 A U.S. child who takes money out at 18 or later reports it on Part III,¹¹² and Form 4970 may apply to income kept in earlier years on the part the Institute funded, which no one is treated as owning.^197,215 The bank or fund sends the parents a yearly report by 1 March.²¹⁷ If it is not a trust, none of these apply. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

Gains from a savings plan in a life insurance policy are taxed in Israel as interest when received.²¹⁸ Deposits and securities in your own name at a bank or a broker are your own property, and mutual funds have their own block below. An account a parent or grandparent opens at a bank in trust for a child is, on our reading, a trust under Israeli law, which the trusts block below covers.²¹⁹

Not a trust: a contract with an insurer, or your own property in your own name.

Not a trust. A policy is a contract with an insurer, and the Code treats insurance companies as corporations.²³ Money and securities in your own name are yours; where a bank or broker holds title only to transfer it at your direction, that is not a trust, and you are treated as owning the property directly.²²⁰ None of them has trustees holding property for beneficiaries under a lock.¹⁸

Does not apply: no employer pays in, and there is no trust.

§402(b) reaches only an employer's contributions to an employees' trust,³⁰ and none is involved.

Not needed.

§6048 reaches only foreign trusts.¹³³

No relief: the saving clause keeps U.S. tax on your interest and gains.

No relief. The saving clause keeps U.S. tax on a U.S. citizen or resident's interest and gains.⁸³

Nothing on Form 3520 or 3520-A.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts, and none of these is one.^133,108,112 Funds you hold in a securities account may be subject to the PFIC rules; this site does not determine that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^121,122

Israeli law has its own trust: a relationship to property under which a trustee must hold it or act in it for a beneficiary or another purpose, created by law, by contract with a trustee, or by an endowment instrument (hekdesh).²¹⁹ The trustee must keep trust property apart from other property,²²¹ and must preserve, manage and develop it and act to achieve the trust's purposes.²²² An account a parent or grandparent opens at a bank in trust for a child is, on our reading, a trust by contract with a trustee, and this block covers it; the argument against, that the money is simply the child's held for a minor, is the one the Savings for Every Child block weighs.^219,206 Money a lawyer holds in trust during a purchase of Israeli property may also be a trust under that law;²¹⁹ we have not researched how U.S. rules treat it.

Israel taxes trusts by where the settlors and beneficiaries live, not by where the trustee is. A trust is an Israeli residents trust if, when created, at least one settlor and one beneficiary were Israeli residents,²²³ and one whose settlors have all been foreign residents but which has an Israeli-resident beneficiary in the year has rules of its own, with a 25% rate by election for a relatives trust.²²⁴ Those rules are separate from Forms 3520 and 3520-A. Israel's trust chapter does not apply to mutual funds, provident funds or section 102 trustees, among others.²²⁵

A foreign trust, on our reading, unless a U.S. court supervises it and U.S. persons control its decisions; U.S. rules decide.

A foreign trust, on our reading, unless a U.S. court supervises it and U.S. persons control its substantial decisions. U.S. rules decide, not Israel's label or tax rules.¹² A trust is an arrangement whose trustees take title to protect and conserve property for the beneficiaries,¹⁸ which an Israeli trust fits, and one with an Israeli trustee may fail the control test and be foreign whatever its governing law, since a trust is foreign unless it meets both tests for a domestic trust.²⁸ A trust that only secures a debt, an estate administrator and a bankruptcy trustee are outside Israel's trust chapter,²²⁵ and are not family trusts; estates have their own block below. The strongest authority against treating an arrangement as a trust is the ruling on a holder who only holds and transfers title at the owner's direction,²²⁰ or the rule for an arrangement that runs a business for profit.²²⁶

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

Who is treated as owner decides who files Part II and Form 3520-A. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which the trust has a U.S. beneficiary.⁴⁵ Someone who funds the trust while not a U.S. resident and becomes one within 5 years is treated, for this rule and for Part I, as transferring that part of the trust on the day their U.S. residency starts.¹⁹⁶ A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone or with the consent of a related or subordinate party subservient to them, or if only they or their spouse can receive distributions during their life.²¹⁵ Otherwise, unless another grantor trust rule makes a U.S. person owner,⁴⁶ no one is owner, and the trust is taxed as a separate, non-grantor trust.²²⁷

A trust has a U.S. beneficiary for the transferor rule if anyone has discretion to pay or benefit any person, unless its terms identify the class who may benefit and none of them is a U.S. person that year,²²⁸ even if nothing is paid to a U.S. person that year;²²⁹ a power to amend the trust to benefit a U.S. person counts, and so does a letter of wishes or other understanding that points to benefiting one, even one that says it is only a suggestion.²³⁰ Where a U.S. person funds the trust, the IRS may treat it as having a U.S. beneficiary unless that person shows it has none.²³¹ A beneficiary who first became a U.S. person more than 5 years after the transfer is not counted,²³² and a transferor whose trust gains a U.S. beneficiary is taxed that year on the income the trust kept for that part to the end of the year before, as an accumulation distribution with the interest charge.^233,234 A settlor who is not a U.S. person keeps the revocable-trust exception for a year only if they can take the property back alone, or with the consent of a related or subordinate party subservient to them, for at least 183 days of it; a power that needs anyone else's consent, such as an independent trustee's or protector's, does not count.^235,236 Once the exception fails for a year it is lost for good.²³⁷ Separately, a portion already treated as owned under §676, or under §677 other than its life insurance rule, on September 19, 1995 keeps that owner for the property it held that day, for as long as it stays so treated.²³⁸ A U.S. settlor of a trust with no U.S. beneficiary can still be owner under another rule, for example by keeping a power to take the property back,²³⁹ and a U.S. beneficiary who alone can take the property is owner of it.^240,215

When a settlor who was not a U.S. person dies, the revocable-trust and spouse-only exceptions end for that settlor's portion, because the person left with the power, even a surviving spouse, is not its grantor;²⁴¹ a U.S. person who alone can take the property, or a U.S. person who funded the trust, can still be owner, and otherwise the portion is taxed as a non-grantor trust.^240,45,227 When a portion stops being owned by a U.S. person, the owner is treated, for the gain rule, as transferring it to a foreign trust that day.²⁴² At death the gain is excused only if the trust's basis in the property is then reset to its value at death under section 1014(a), as where the owner could still revoke the trust;²⁴³ otherwise the owner is treated as transferring it immediately before death and recognizes the gain.²⁴⁴

No relief.

The saving clause lets the United States tax its citizens and residents as if the treaty had not come into effect,⁸³ and none of the provisions it spares concerns foreign trust reporting.⁸⁴ A trust is a resident of Israel for the treaty only so far as its income is taxed in Israel as a resident's.²⁴⁵

Part I for whoever funds it, Part II and Form 3520-A for an owner, Part III for whoever receives a distribution.

A U.S. person who transfers property to the trust files Part I for that year.¹³³ A transfer to a foreign trust is treated as a sale, and you recognize any gain on what you transfer;²⁴⁶ a transfer is not, to the extent anyone is treated as owning the part it funds.²⁴⁷ Part I also applies on the death of a U.S. citizen or resident who was treated as owner of any part of the trust, or whose gross estate includes part of it, and to property that passes to the trust by reason of a U.S. person's death; the executor reports it, whether or not the executor is a U.S. person.¹³⁴ The gain rule does not apply to property that passes to the trust by reason of a U.S. person's death, if its basis in that property is set under section 1014(a).²⁴³ A U.S. owner files Part II and makes sure Form 3520-A is filed, or files a substitute, each year.^108,117 A U.S. beneficiary who receives a distribution files Part III for that year.¹¹² A distribution from a non-grantor trust that carries out income the trust kept in earlier years is an accumulation distribution, taxed with an interest charge on Form 4970.¹⁹⁷ Form 4970 can also apply to a transferor taxed when the trust gains a U.S. beneficiary, as the owner step says.²³⁴ Rev. Proc. 2020-17 does not apply: it covers only retirement trusts and medical, disability, or educational savings trusts.¹⁴⁶

A distribution is any gratuitous transfer from the trust, whether or not it is a grantor trust and whether or not you are named as a beneficiary, including a credit card bill it pays or guarantees and a check written on its account.²⁴⁸ On the proposed rules, a payment from a company the trust owns to a U.S. person who is a grantor, owner or beneficiary of the trust, or related to one, is treated as a distribution from the trust, unless that person shows it is properly attributable to their own interest in the company.^249,76 A loan of cash or marketable securities, or use of trust property, to you or a related U.S. person goes on Part III whether or not it is taxable;²⁵⁰ it is treated as a distribution for income tax, except a loan made on a qualified obligation (a written loan in U.S. dollars, for 5 years or less, at an interest rate tied to the federal rate, for which you extend the IRS's time to assess and that you report each year) or use you pay the fair market value for within a reasonable time,^{251,252,253,254} and where a U.S. person funded the trust, the loan instead makes it a grantor trust, and it still goes on Part III.²⁵⁵

If you are the U.S. owner of the part that pays you, you complete only lines 24 and 27, and the rest of this paragraph does not apply to you.¹¹¹ Otherwise, with a complete Foreign Grantor Trust Beneficiary Statement you treat a payment as coming from the owner, so a gift from the owner is not your income;²⁵⁶ without one, the default method applies even to a distribution from a grantor trust.²⁵⁷ From a non-grantor trust you may use the actual method if you have a Foreign Nongrantor Trust Beneficiary Statement,²⁵⁸ and without one the default method applies: the part of this year's distributions above 1.25 times the average of the three years before is an accumulation distribution, taxed on Form 4970 with an interest charge figured on Form 3520's Schedule C, and the rest is ordinary income,^259,197,260 and once you use the default method you must keep using it in later years, except that in the year the trust ends you may use the actual method if you have the statement.²⁶¹ In the trust's first year as a foreign trust, you stop Part III once you have entered how many years it has been foreign, so no accumulation distribution is figured that year.²⁶² The statute treats the whole distribution as an accumulation distribution where adequate records are not given;²⁶³ the default method is the IRS's relief from that, open if you can give the trust's distributions for the three years before,²⁶⁴ and where there were none, it too makes the whole distribution an accumulation distribution.²⁵⁹ A foreign trust's distributable net income, the income its distributions carry out, includes its capital gains,²⁶⁵ and the exception for income kept before a beneficiary was born or turned 21 does not apply to it.²⁶⁶ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.²⁶⁷

An employer company can allocate its shares or options to employees through a trustee: the shares, with every right they carry, are deposited with a trustee the tax office approves until at least the end of a set period, 24 months in the capital gains track for shares allocated from 2006.^268,269 A share includes a right to buy one.²⁷⁰ The employee is not taxed when they are allocated; tax falls when the trustee transfers the shares to the employee or sells them, whichever is first, at 25% as a capital gain in the capital gains track if the trustee held them to the end of the period.^271,272 Release or sale before the end of the period is taxed as work income instead.²⁷³