How to transfer title of the house to the wife

[Tkydon]

The standard advice for avoiding estate tax here is...... do not wait to die to give away your money to your relatives. Hit their gift tax threshold ever year if your assets allow it.

I thought this was a one time thing.

What is the yearly gift tax threshold?

I am still trying to understand this multiple taxation scheme that punishes particularly stay-at-home wives. Not only would their pension be small but attempts to allocate for them additional resources would require taxing the already taxed income of their husbands. Doubtless, there must be something I fail to grasp.

The yearly Tax Free Allowance on Gifts is Y1,100,000

The burden of Gift Tax falls on the Recipient / Donee... If the total of all Gifts received in a given tax year is greater than Y1,100,000, then the amount over Y1,100,000 is taxable.

[Tkydon]

I think you're missing that

A. Spouses can reimburse outside the gift tax for household expenses. Children as well can be given money for education and living expense.

B. A large amount of inheritance is tax exempt for a spouse.

The yearly gift tax is 1.1 million per-person. That's 1.1 million total from all sources.

If your wife received 1 million from her father and 1 million from her uncle. That other .9 million would be taxed according to the gift tax table.

That makes sense.

However, it still leaves the issue of the wife specifically, meaning, how can I set her up with a good pension/investment fund without having to pay taxes on income I have already paid taxes on?

Say, for example, I transfer 3 million yen per year to her account for her to do IDECO, NISA, etc.

How does this work out?

Y1.1M would be Tax free and the other Y1.9M + Any other gifts she received in the same year would be subject to Gift Tax.

National Pension Contributions Y16,590 per month = Y199,080 per year OK
Max iDECO Contributions Y23,000 per month = Y276,000 per year Still OK
Max Tsumitate NISA Contributions Y33,330 per month = Y400,000 per year Still OK

Total Y875,080 => Still under the Gift Tax Threshhold

or

National Pension Contributions Y16,590 per month = Y199,080 per year OK
Max iDECO Contributions Y23,000 per month = Y276,000 per year Still OK

Total Y475,080, leaving Y 624,920
Regular NISA Contributions up to Y52,076 per month = Y624,912 per year Still OK
(so long as she does not receive any other gifts in the tax year)

If you wanted to max out the Regular NISA to the full Y1,200,000 per year, then Y575,080 would be taxable at 10%.
If you wanted to cover that 10% tax as well you would have to transfer an additional Y63,900

Total Y1,738,980 - Total Tax Y63,900

The additional Y1,261,020 out of Y3M would also be taxable at 10%, so Y126,100 additional tax...

[northSaver]

B. A large amount of inheritance is tax exempt for a spouse.

This is a very important point that is easy to miss. There are lots of pages written in English about Japanese inheritance tax that state the standard tax-free allowance: 30M + 6M x number of heirs. But I couldn't find any (so far) that state the tax-free allowance in the case of a spouse, which is: 160M. Here it is in Japanese:
https://www.nta.go.jp/taxes/shiraberu/t ... u/4158.htm

With this in mind, you don't need to worry so much about setting up your wife for retirement by donating to her iDeco, NISA and other retirement funds, because she can simply inherit 160M worth of yours tax-free when you die! Or maybe I'm misreading it somehow?

[trajan]

Y1.1M would be Tax free and the other Y1.9M + Any other gifts she received in the same year would be subject to Gift Tax.

National Pension Contributions Y16,590 per month = Y199,080 per year OK
Max iDECO Contributions Y23,000 per month = Y276,000 per year Still OK
Max Tsumitate NISA Contributions Y33,330 per month = Y400,000 per year Still OK

Total Y875,080 => Still under the Gift Tax Threshhold

or

National Pension Contributions Y16,590 per month = Y199,080 per year OK
Max iDECO Contributions Y23,000 per month = Y276,000 per year Still OK

Total Y475,080, leaving Y 624,920
Regular NISA Contributions up to Y52,076 per month = Y624,912 per year Still OK
(so long as she does not receive any other gifts in the tax year)

If you wanted to max out the Regular NISA to the full Y1,200,000 per year, then Y575,080 would be taxable at 10%.
If you wanted to cover that 10% tax as well you would have to transfer an additional Y63,900

Total Y1,738,980 - Total Tax Y63,900

The additional Y1,261,020 out of Y3M would also be taxable at 10%, so Y126,100 additional tax...

Thank you very much for the detailed explanation.

Regarding filing itself.

She is my dependent and has never filed taxes herself. It is a fact she is covered to an extent by my medical insurance and I understand that she is somehow also covered for some type of basic of retirement through mine. It follows that I must be paying a premium for these. Further, I am aware that my taxes include some small deductible for her.

Now to the example of giving her Y3 million.

How do I change my filling to account for this? I do not want her to cease to be my dependent.

Will she need to file taxes herself to account for the Y3 million so she can pay those additional gift taxes?

[trajan]

B. A large amount of inheritance is tax exempt for a spouse.

This is a very important point that is easy to miss. There are lots of pages written in English about Japanese inheritance tax that state the standard tax-free allowance: 30M + 6M x number of heirs. But I couldn't find any (so far) that state the tax-free allowance in the case of a spouse, which is: 160M. Here it is in Japanese:
https://www.nta.go.jp/taxes/shiraberu/t ... u/4158.htm

With this in mind, you don't need to worry so much about setting up your wife for retirement by donating to her iDeco, NISA and other retirement funds, because she can simply inherit 160M worth of yours tax-free when you die! Or maybe I'm misreading it somehow?

This is indeed quite relevant as it would mean I could invest myself and those assets would go to her eventually anyway.

[Tkydon]

Under Japanese law, there are certain statutory share requirements so that heirs cannot be cut out of your will completely.

When the Heirs are the Spouse and Children, the Spouse receives 1/2 and the Children divide 1/2 between them.
When the Heirs are the Spouse and Parents, the Spouse receives 2/3 and the Parents 1/3.
When the Heirs are the Spouse and Siblings, the Spouse receives 3/4 and the Siblings 1/4 between them.
and others...

Various Credits are then applied.


Gift Tax Credit
Credit for any Gift Taxes Paid on gifts from the deceased in the 3 years prior to the death


The Spouse Credit
The Spouse Credit is calculated as follows:

The Total Taxable Assets

multiplied by

The less of
The Net Taxable Assets (actual acquired) by the spouse
or
The greater of the Spouse's Statutory Share of the Total Taxable Assets Or Y160M
Divided by
The Total Taxable Assets

(Inheritance Tax Law Articles 31 & 32 Paragraphs 1 & 6)

Effectively, Y160M...