On Tuesday, November 10, 2026, the Israel Tax Authority published a professional position paper on the taxation of the heirs of an elderly apartment owner who dies in the middle of an urban renewal (hithadshut ironit) project. According to Maariv, the paper is numbered 10/2026. The question concerns anyone who holds an inherited apartment in a pinui binui (evacuation and reconstruction) project or a TAMA 38 project, after a parent signed with the developer and did not live to see the new building. The Authority's answer is clear: if the death occurred before the “sale day” (yom hamechira) for tax purposes, the heirs do not automatically receive the tax benefits the elderly owner was entitled to, and, as Ynet reported, their eligibility will be examined according to their own circumstances. The paper applies to pinui binui and TAMA 38 transactions, and many families whose parents signed at an advanced age will be affected by it.
What an elderly owner receives in pinui binui
Israel's urban renewal legislation gives older apartment owners a special status. As Israel Hayom noted, elderly (kashish) status is reserved for an owner aged 70 or over, with age tested on the day the first contract is signed. According to the reports on the position paper, the developer must offer an elderly owner alternatives it is not required to offer the other residents: two small apartments instead of one, a small apartment plus a cash payment, a move to a nursing home of a value similar to the discounted value of the replacement apartment, or a sale of the replacement apartment to the developer in order to buy an apartment outside the project. Each alternative carries a tax benefit under the Land Taxation (Betterment and Acquisition) Law, 5723-1963, subject to its conditions.
In December 2025 the Deputy Attorney General (Civil Law) determined, as reported by Ynet and Calcalist, that the right to the special consideration passes to the heirs unless the agreement provides otherwise. The exception is the move to a nursing home, a personal right that is not inherited. That opinion dealt with the relationship with the developer, not with tax, and the position paper now fills that gap. Anyone managing such a project with a developer can read more about the stages and the securities on our urban renewal and pinui binui page.
Sale day: the date that decides the benefit
According to Bizportal and Ice, the sale day is the date on which the transaction is completed for tax purposes and an assessment is issued for it. It is not necessarily the signing date, and according to Bizportal the law even allows it to be deferred under certain conditions. When the agreement is conditional on a building permit, for example, the sale day may fall only after the permit is granted, as Ynet explained. The example given by Calcalist illustrates the gap: an agreement signed in 2022, a death in 2024 and conditions fulfilled in 2026. The sale day fell in 2026, after the death, so the special benefits for the elderly owner do not pass to the heirs.
When the death occurred after the sale day, the picture reverses and the benefits are preserved. According to Bizportal, if the elderly owner had already sold the replacement apartment and died before buying another one, the heirs can complete the purchase and claim the exemption, subject to the conditions of the law.
Inherited apartment in pinui binui: what the heirs actually receive
Under the position paper, as quoted by Ice, the heirs' eligibility for the tax benefits will be examined according to their personal eligibility alone, as holders of a residential unit, and they will not be entitled to the consideration unique to the elderly owner or to the benefits attached to it. According to Bizportal, the developer remains bound by what it promised, but the tax on the consideration will be determined by the exemptions the heirs themselves are entitled to. Maariv stressed that this does not mean the heirs will necessarily be taxed on the full consideration.
On the route of two small apartments, the outcome depends on the number of heirs. According to the reports, if the apartment passed to at least two heirs, they can receive two apartments exempt from tax. A sole heir will receive an exemption for one apartment only, unless he or she is personally entitled to two. The nursing home alternative drops out at the inheritance stage, and on the route of selling the replacement apartment to buy a different one, the heirs will not enjoy the elderly owner's benefit and the sale will be taxed under the ordinary rules.
Corrected notice and a death clause in the agreement
The position paper leaves one opening. According to Maariv and Bizportal, the heirs and the developer may agree, before the sale day, to change the original consideration. In that case a corrected notice is filed with the Tax Authority with the heirs' details and the new terms of the engagement, and the tax is calculated accordingly. According to Bizportal, the Authority even recommends including in the urban renewal agreement an explicit clause stating what happens to the special consideration if the elderly owner passes away.
Several practical steps follow. A family whose older parent is about to sign a pinui binui or TAMA 38 agreement should make sure the agreement addresses the event of death, rather than relying on a general undertaking by the developer. Heirs whose project has not yet reached the sale day should find out which alternative was chosen, how many heirs are listed in the inheritance order (tzav yerusha), and whether it makes sense to reach a new agreement with the developer before that date. Anyone who intends to sell the new apartment later should also check the betterment tax exemption for heirs. Arranging the rights in the estate early, as described on our inheritance disputes and estate distribution page, prevents disputes between siblings at a stage when every month of delay costs money.
The Authority published a separate clarification on that exemption in March 2026, position paper 03/2026. According to Ynet, the betterment tax (mas shevach) exemption on the sale of an inherited apartment under section 49B(5) of the Land Taxation Law also applies to the replacement apartment received in the project, provided the conditions of the section are met. When the inheritance took place after the old building was demolished and before the new apartment was completed, the exemption is available only if the inheritance occurred after November 2021, when Amendment 96 to the law took effect. The clarification is limited to urban renewal transactions and may not be applied to other transactions.
If your parents signed an urban renewal agreement, or you inherited an apartment in a project that has not yet been completed, you can contact our office in Modiin or Tel Aviv for a review of the agreement and your specific situation.
Questions and answers
What happens to an elderly owner's tax benefits if he or she dies before a pinui binui project is completed?
Under the position paper the Tax Authority published on November 10, 2026, if the death occurred before the sale day for tax purposes, the heirs do not automatically receive the tax benefits unique to the elderly owner. Their eligibility is examined according to their personal circumstances as holders of the apartment. If the death occurred after the sale day, the benefits are preserved.
Can heirs receive two tax-exempt apartments instead of the parent's apartment?
According to the reports on the position paper, if the apartment passed by inheritance to at least two heirs, they can receive two apartments exempt from tax. A sole heir will receive an exemption for one apartment only, unless he or she is personally entitled to two.
Can I sell, without betterment tax, the new apartment I received in pinui binui for an apartment I inherited?
Under Tax Authority position paper 03/2026, reported by Ynet in March 2026, the heirs' exemption under section 49B(5) of the Land Taxation Law also applies to the replacement apartment, on three cumulative conditions: the seller is the deceased's spouse, a descendant or a descendant's spouse; on the day of death the deceased owned only one residential apartment; and had the deceased sold the apartment during his or her lifetime, the sale would have been exempt.
Source: Maariv (Hebrew), 10.11.2026; Ynet (Hebrew), 10.11.2026; Bizportal (Hebrew), 10.11.2026; Ice (Hebrew), 10.11.2026; Calcalist (Hebrew), 10.11.2026; Israel Hayom (Hebrew), 10.11.2026; Ynet: Position paper 03/2026 on an inherited apartment in urban renewal (Hebrew), 24.3.2026
First published in Hebrew. Read the Hebrew original