Inheritance tax on a house you live in

[TokyoInk]

Quick question related to inheritance tax. My (Japanese) wife’s parents are getting on in age and we’re thinking of moving in with them in the house they’ve owned for the past 40 years. It’s a pretty big house so they won’t be able to manage on their own in the next few years.
It’s been decided that when they pass they’ll leave the house to us. Is there still tax to be paid on this?
In my home country, if you have lived in the house for 7 years, you are exempt from paying any inheritance tax. We don’t plan to sell the place, we’ll be there until we retire at least.

Can anyone give me any insight? Thanks

[ClearAsMud]

In my home country, if you have lived in the house for 7 years, you are exempt from paying any inheritance tax. We don’t plan to sell the place, we’ll be there until we retire at least.

There is no such exemption for inherited property in Japan, although various special deductions exist that could reduce or eliminate tax should the value of the inherited estate, including the house, exceed the basic deduction. Remember also that house belongs only the listed owner(s), so it -- or the relevant proportion of it -- forms part of a single owner's personal estate. Check the other threads on the forum for information about some of the variables involved, which are too complex to summarize here.

[Tkydon]

Is you wife an only child?

https://retirewiki.jp/wiki/Inheritance_tax

There are Statutory and Minimum Statutory Inheritances, that mean that others may have a call on the estate.

Is the house owned solely in your wife's father's name? (Probably)

There will be tax to be paid on the value of your wife's (and your) inheritance(s separately) when they pass.

If you wife's father passes first, your wife's mother will also be included in the calculations for, and maybe subject to inheritance tax on the father's estate, depending on the size of his estate and actual distribution.

If you wife's mother passes first, your wife's father will also be included in the calculations for, and maybe subject to inheritance tax on the mother's estate, depending on the size of her estate and actual distribution.

When the surviving parent passes, the remaining estate maybe subject to inheritance tax on the estate, depending on the size of the estate, with a Credit for Gift Tax Paid or Credit for Chain Successions in the last 10 years.

In any case, the Statutory and Minimum Statutory Inheritances mean that taxes would be due each time.

There may be some strategies you can use to pre-empt and reduce the taxes due, but they will depend on such things as the size of each parent's estate, number of heirs and legatees, the amount of time they have left, and other factors.
You should probably consult an Inheritance Lawyer based on your wife's actual situation.