24 October 2026 · Real estate
A lawyer’s trust account in a real estate transaction
In a real estate transaction in Israel the lawyer holds part of the price in trust and releases it to the seller when the condition set in the agreement is met, for example registration of a caution note or receipt of the tax clearances. The Israel Bar rules require such money to be held in a separate bank account, and the anti-money laundering order sets when the bank records the beneficiaries of the account.
The duty of segregation in the ethics rules
The Israel Bar Rules (Professional Ethics), 1986 (the “Ethics Rules”) provide in rule 39 that a lawyer shall keep a separate bank account for money deposited with them in trust. Under rule 40 the lawyer informs the client of any amount received for the client and transfers it within a reasonable time. Under rule 41 the lawyer asks the person for whom the money is held, close to receiving it, for detailed instructions on its delivery and investment. If no instructions are received within a reasonable time, the lawyer invests it under section 6 of the Trust Law, 1979, or under section 50 of the Legal Capacity and Guardianship Law, 1962, or in another way that offers a reasonable prospect of preserving its value. Under rule 42 the lawyer gives the client a financial account within a reasonable time after the matter ends, and also on the client’s demand made within three years of the end of the matter.
The Ethics Rules do not distinguish between a general deposit account, in which the lawyer holds money of different clients, and an account opened for a particular transaction.
The exemption for the general account in the Banking Order
The Prohibition on Money Laundering (Identification, Reporting and Record-Keeping Obligations of Banking Corporations for the Prevention of Money Laundering and Terrorist Financing) Order, 2001 (the “Banking Order”) exempts from recording a beneficiary the account that a lawyer, rabbinical advocate or accountant opens for clients, where three conditions are met: the balance at the end of each business day does not exceed NIS 300,000, each transaction in the account does not exceed NIS 100,000, and the account holder declares, with an original signature, that this is their only account of that kind (section 5(a)(7)). Where one of the conditions is not met, the bank sends a warning. If it happens again after the warning, the bank carries out no initiated transaction in the account other than withdrawal of the balance, closing the account and repaying debts, until the account holder completes a declaration of beneficiaries under section 4 of the Order.
Recording the beneficiaries
An “account” for the purposes of the Banking Order includes an engagement under a trust agreement (section 1). In an account opened for a particular transaction, the account holder declares the beneficiaries with an original signature, and the bank records their names and identity numbers before the account is opened (sections 2(b) and 4 of the Order). Where the account holder declares that the identity of the beneficiary cannot be known, the bank records the reason and refers the account holder in writing to the duty to provide the beneficiary’s details as soon as their identity becomes known (section 2(b)).
Proper Conduct of Banking Business Directive 411 requires the bank to take reasonable measures to understand the nature of the trust, its control structure and the basis on which it was created, and to record the trustee, the beneficiaries and anyone who controls it (sections 53 and 54). For a trust with many beneficiaries who can be characterised, the bank may record the beneficiaries in general terms, provided the account holder undertakes to disclose their identity when they are paid (section 55).
A general account and a transaction account
| General deposit account | Account for a particular transaction | |
|---|---|---|
| Money in the account | Money of different clients, held in trust | Money of one transaction, held in trust |
| Recording beneficiaries | Exempt while the conditions of section 5(a)(7) of the Order are met | Declaration under section 4 on opening the account |
| Conditions for the exemption | End-of-day balance up to NIS 300,000, each transaction up to NIS 100,000, only account of that kind | No exemption |
| Where a condition is not met | A warning. If it happens again, the account is restricted until a declaration under section 4 | Not relevant |
| Ethics Rules | Rules 39 to 42 | Rules 39 to 42 |
A party who is a foreign resident
For a foreign resident, the “identity number” for the purposes of the Banking Order is the passport number and the name of the issuing country (section 1), and the beneficiary is recorded accordingly. Where the lawyer carries out a purchase or sale of real estate for a client, the lawyer is also subject to the Prohibition on Money Laundering (Identification and Record-Keeping Obligations of a Business Service Provider) Order, 2014, and identifies the client before providing the service. Money that reaches the trust account from abroad is also reviewed at the receiving bank under Directive 411, as described in the guide to transferring money from abroad to Israel.
Further reading
Sources
Israel Bar Rules (Professional Ethics), 1986 (Hebrew), rules 39 to 42 · Prohibition on Money Laundering Order (Banking Corporations), 2001 (Hebrew), sections 1, 2, 4 and 5 · Proper Conduct of Banking Business Directive 411 (Hebrew), sections 53 to 57 · Trust Law, 1979 · Prohibition on Money Laundering Order (Business Service Provider), 2014
General overview only, not legal advice. The ethics rules and anti-money laundering orders are updated from time to time. Updated 24 October 2026.