Buying an apartment in the name of a minor child can sound like a natural family solution: parents or grandparents want to secure the child’s future, transfer an asset to the next generation, or carry out long-term family planning. But when purchase tax is involved, the legal picture becomes much more complex.
The central question is simple: if a minor receives an apartment as a gift, or buys an apartment registered in the minor’s name, can the minor be treated as a purchaser of a “single apartment” and benefit from reduced purchase tax brackets? In many cases, the answer is not necessarily. Where the minor’s parents own a residential apartment, the Israel Tax Authority and the courts may treat the minor as part of the same family unit, meaning that the apartment registered in the minor’s name will not necessarily be considered a single apartment.
The issue was significantly reinforced in the Burger ruling, which dealt with minors who received apartments as gifts from their grandfather. Although the apartments were not financed by the parents, and although mechanisms were created to ensure property separation, the Appeals Committee dismissed the appeal and held that the family unit presumption applied to the minors.
What Is the Purchase Tax Benefit for a Single Apartment?
Purchase tax is the tax paid by a purchaser of real estate rights. When the purchase concerns a single residential apartment, Israeli law grants more favorable purchase tax brackets than those applying to an additional apartment. Under the brackets published by the Israel Tax Authority, the purchase of a single apartment includes a first bracket in which no purchase tax is paid up to a certain amount, followed by gradually increasing tax rates.
By contrast, where the apartment is an additional apartment, the purchase tax rate is higher and applies from the first shekel, according to the brackets for an apartment that is not a single apartment. The difference between classifying an apartment as a single apartment and classifying it as an additional apartment may therefore reach tens or even hundreds of thousands of shekels. For further discussion of the practical difference between a single apartment and an additional apartment, see Second Apartment Purchase Tax – What You Really Pay.
This is exactly why the question arises with minors: should only the apartment registered in the minor’s name be examined, or should the parents’ apartments also be counted?
The Family Unit Presumption: The Minor and the Parents Are Treated as One Purchaser
The Real Estate Taxation Law provides that, for purchase tax purposes, a purchaser, the purchaser’s spouse, and their children under the age of 18 are treated as one purchaser, subject to exceptions set out in the law. This is the family unit presumption, and it is one of the most important provisions when examining the purchase of an apartment in the name of a minor.
The practical meaning is that when a minor purchases an apartment, or receives one as a gift, the minor is not always examined as entirely separate from the parents. If the parents own a residential apartment, the minor’s apartment may be treated as part of the family unit’s overall apartment holdings.
This is not merely a technical rule. Behind it stands the idea that the purchase tax benefit for a single apartment is intended to assist in acquiring a residential roof over one’s head, not to grant a tax benefit to a family that already owns an apartment and acquires another asset in the name of a minor child.
The Burger Ruling: Apartments Given by a Grandfather to Minors
In V.A. 49040-09-24 Burger et al. v. Director of Real Estate Taxation, Central District, the Appeals Committee dealt with a question very similar to the one many families face. Several minors received apartments as gifts from their grandfather. The minors belonged to several different family units, each of which already owned a residential apartment before the transfer.
The appellants argued that the case was exceptional. They claimed that the apartments were not purchased with the parents’ funds but were given as gifts by the grandfather, and that contractual mechanisms were put in place to ensure property separation between each apartment and the minor’s parents. Therefore, in their view, each minor should have been treated as owning a single apartment and taxed under the single-apartment purchase tax brackets.
The Director of Real Estate Taxation rejected that position. In the Director’s view, the family unit presumption applied: the minor and the parents are treated as one purchaser, and therefore, where the parents already own an apartment, the apartment registered in the minor’s name does not enjoy single-apartment status.
The Appeals Committee accepted the Director’s position and dismissed the appeal. The result was purchase tax calculated under the brackets for an additional apartment, rather than the brackets for a single apartment.
Why Did the Court Reject the Property Separation Argument?
One of the important points in the ruling is the distinction between spouses and minors. Earlier case law recognized that in certain cases spouses may rebut the family unit presumption, for example where there is a prenuptial or financial agreement and actual property separation is proven in practice. The logic there relates to complex family situations: second marriages, assets owned before marriage, children from previous relationships, and the need to respect the property autonomy of spouses.
But the court held that this logic does not automatically apply to minors. A minor living with the parents is not in the same position as a spouse entering a relationship with prior assets and a separate family history. With minors, the legislature’s starting point is that they are part of their parents’ family unit.
The court emphasized that even if the source of funding is the grandfather rather than the parents, this is not necessarily the decisive point. The question is not only who paid for the apartment, but whether the transaction is the type of transaction for which the single-apartment purchase tax benefit was intended. Where an apartment is registered in the name of a minor while the family unit already owns an apartment, the transaction will usually have a capital or investment character, rather than representing the family’s first residential home.
Does a Gift From a Grandfather Change the Result?
The Burger ruling clarifies that the mere fact that the apartment was given as a gift by a grandfather is not enough, by itself, to entitle the minor to the single-apartment brackets. Even if no improper tax planning is alleged, and even if the money did not come from the parents, the family unit presumption may still apply.
This is an important point for families planning an intergenerational transfer of assets. From a family perspective, the intention may be entirely legitimate: a grandfather wishing to give an asset to a grandchild, secure the child’s future, or distribute property among grandchildren. But for purchase tax purposes, the family intention is not necessarily enough to obtain the single-apartment benefit.
Simply put: registering the apartment in the minor’s name does not automatically detach the apartment from the parents’ family unit. Anyone considering a gift of an apartment within the family should view the step together with the rules governing transfer of an apartment without consideration between relatives, not merely as a registration act.
What if the Minor’s Parents Do Not Own an Apartment?
Where the minor’s parents do not own another apartment, the result may be different, because the family unit presumption does not add an existing parental apartment to the picture. However, even then, all the circumstances must be examined: whether the property is a residential apartment, who the actual purchaser is, the source of funding, whether additional rights exist, and whether the statutory conditions for the single-apartment brackets are met.
It should therefore not be assumed that every purchase in a minor’s name will automatically be taxed as an additional apartment, but it should also not be assumed that every apartment registered in a minor’s name will be treated as a single apartment. A specific legal and tax review is required.
Exceptions: A Married Minor and Special Circumstances
The law itself recognizes that not every minor should be counted together with the parents. For example, a married child is excluded from the family unit presumption. The law and case law also address additional special circumstances, depending on the statutory wording and the relevant context.
The significance is that the legislature knew how to create exceptions when it wished to do so. Precisely because explicit exceptions exist, courts are cautious about adding a broad additional exception merely because the family created a property-separation mechanism or because the apartment was gifted by a grandfather.
The Family Implications: Not Just Tax, but Full Family Planning
When a family considers buying an apartment for a minor or transferring an apartment to a minor as a gift, purchase tax is only part of the picture. Other issues must also be examined: real estate taxation, gift law, trusts, control over the asset until the minor reaches adulthood, relationships between siblings and grandchildren, future inheritance implications, and possible consequences when the minor later wishes to purchase a home.
For example, an apartment registered in a minor’s name today may affect the minor’s future entitlement to tax benefits when buying another apartment, family relationships, and the ability to take actions regarding the property without the necessary approvals. In some cases, the involvement of the Family Court may also be required, especially when dealing with a minor’s assets.
Such planning should therefore be examined not only through the question “how much purchase tax will be paid now,” but also through the broader question: “what is the legal and family meaning of registering an asset in a minor’s name?” In this context, it is advisable to combine real estate tax review with family wealth management and intergenerational transfer.
What Should Be Checked Before Buying an Apartment for a Minor?
Before purchasing or transferring an apartment to a minor, it is advisable to check, among other things: whether the minor’s parents own an apartment or rights in an apartment; whether the minor has any additional real estate rights; whether the apartment is being purchased or gifted; the source of funding; whether gift agreements, trusts, or protective mechanisms exist; whether court approval is required; what the purchase tax liability will be; and what the future implications will be for the minor and the rest of the family.
In cases of intergenerational transfer, it is especially important to examine the broader picture: whether the gift is equal among future heirs, whether there is an existing will, whether there are additional assets, and whether the move may create family disputes later. For more on family tax planning, see real estate tax planning for intergenerational transfers of real estate assets.
In addition, because this is a real estate transaction in every respect, it is important to examine the state of the rights, registration, cautionary notes, mortgages, and restrictions applying to the property. This is precisely why the involvement of a real estate transactions attorney is not merely a technical matter.
The Bottom Line
A minor who receives an apartment as a gift, or for whom an apartment is purchased, is not automatically entitled to the purchase tax brackets for a single apartment. Where the minor’s parents own a residential apartment, the family unit presumption may cause the apartment to be treated, for purchase tax purposes, as an additional apartment of the family unit.
The Burger ruling strengthens this position and clarifies that a gift from a grandfather, an external source of funding, and a contractual property-separation mechanism do not guarantee entitlement to the single-apartment benefit for a minor.
The practical lesson is clear: before buying an apartment for a minor or transferring an apartment to a minor as a gift, preliminary legal and tax review is essential. A decision that looks simple and family-oriented may create significant tax liability and long-term legal consequences.
Disclaimer: The information in this article is provided for general informational purposes only and does not constitute legal advice, a legal opinion, or a substitute for individual advice from an attorney. Each case should be reviewed according to its specific circumstances, and it is recommended to consult an attorney before making any decision or taking action.
