Children's Accounts - Deposits and Gift Tax

[Tsumitate Wrestler]

But you were worried about the children spending the money and getting an IHT bill. But as I pointed out, the act of them spending the money would prove the decedent didn’t have control over it.

It does not though. The NTA can choose to view that act of spending as the moment of receipt/awareness. Thus, triggering liability for the full amount received all at once.

This is the "logical" extension of the "money in the dresser" tax avoidance problem that plagues the NTA. Suddenly having, and spending said funds does not prove anything. Nor does inheriting an account in your name. These were the classic tax-avoidance moves in Japan.

There needs to be a clear establishment of receipt and acknowledgement everytime the gift is given. Otherwise, it can be deemed tax-avoidance.

...

Oh man, I do not like make these arguments. But, this is the rabbit-hole I went down.

[Deep Blue]

I can see your mind is made up. Enjoy making your gift certificates, and getting them stamped by a Notary Public to prove they were not created retrospectively.

[sutebayashi]

It’s an interesting topic…

Starkimpossibility’s initial comment on that Reddit thread started out with: “…Regularly gifting money/assets to your child, to take advantage of the 1.1 million yen annual tax-free gift threshold, is a common and legitimate strategy.”

But then all these other buts come up.

What are us taxpayers (or tax avoiders/evaders?) really supposed to believe…

There is something very wrong when people don’t have confidence where they stand with regard to taxes.

The only people who benefit from such confusion are those in the tax advisory business, which is frankly a dead-weight on society.

[Deep Blue]

I do wonder how counterproductive the IHT laws here are. If they were simpler and taxes lower then I’d be happy to pay them (indirectly of course, my heirs actually pay) but the taxes are so insanely high it incentivizes me to structure my affairs so as to minimize them, and that probably means the NTA receives a lot less than it would otherwise.

[RetireJapan]

For anyone actually worried about this, paying family living expenses directly (rent, utilities, groceries, travel, insurance, education expenses) while letting them save and invest their income seems pretty foolproof.

Personally I'm planning to do that as well as regularly gifting up to a million yen a year or so

[Deep Blue]

So if you pay for your (adult) child’s rent it isn’t counted as a gift to them?

[Deep Blue]

Laughing out loud, just read some more and paying living expenses isn’t considered a gift. What a ridiculous system, as if money isn’t completely fungible.

As Ben says, this opens up the possibility of substantially more asset transfers to adult children before one’s death, even without the dodge of leaving Japan for long enough to get outside of the gift tax system (which seems to have been lengthened to ten years now).

Buying real estate and passing that alone also a good way to get substantially more assets in the children’s hands without gift or inheritance tax.

[RetireJapan]

So if you pay for your (adult) child’s rent it isn’t counted as a gift to them?

If I remember correctly, former PM Hatoyama had a minor scandal where his mummy was giving him tens (hundreds?) of millions of yen a month to cover his living expenses.

The scandal was that he might be using the money for politics, not that they weren't paying any tax on it

[Tsumitate Wrestler]

I can see your mind is made up. Enjoy making your gift certificates, and getting them stamped by a Notary Public to prove they were not created retrospectively.

This animosity seems very misplaced. We are all engaging with new ideas here that challenge our preconceptions.

[Tkydon]

Laughing out loud, just read some more and paying living expenses isn’t considered a gift. What a ridiculous system, as if money isn’t completely fungible.

As Ben says, this opens up the possibility of substantially more asset transfers to adult children before one’s death, even without the dodge of leaving Japan for long enough to get outside of the gift tax system (which seems to have been lengthened to ten years now).

Buying real estate and passing that alone also a good way to get substantially more assets in the children’s hands without gift or inheritance tax.

"Transfers of funds between persons who have a legal responsibility to support each other do not constitute a gift, unless the Gift is for a purpose other than support or living expenses, etc.."

'legal responsibility to support each' means 'dependent'.

Whilst a student under about 25 might be considered a 'dependent' and you may even be claiming the Dependent Deduction on your taxes, an independent adult child Shakaijin would not be considered a 'dependent', and I doubt the 'legal responsibility to support each other' with 'support or living expenses" would fly...