Early Inheritance - Any Experience?
Early Inheritance - Any Experience?
This summer I’m going back home for a visit, and my parents want to talk about their wills, inheritance, taxes, etc. The gift tax rate in Japan seems quite high, but I noticed on the Wiki that there’s something called the early-inheritance tax system. It says up to 25 million yen can be given, with the assumption that it be used towards the inheritance when the person passes away. It may be a good option for my situation, so I’m curious if anyone has any experience with it, or has any information about it. What kind of paperwork do I need, how to transfer the money, etc.
Re: Early Inheritance - Any Experience?
https://taxsummaries.pwc.com/japan/indi ... ther-taxes
There is a special system where the taxpayer can make an irrevocable election to integrate inheritance and gift tax when certain conditions are met.
Under the special system, referred to as 'settlement of taxes at the time of inheritance':
Qualified transfers are those from lineal ascendants who are aged 60 years and older made to their lineal descendants who are aged 20 years or older.
Gifts of up to a total of JPY 25 million will be exempt from gift tax. Several gifts can be made tax-free as long as the total gifts do not exceed the JPY 25 million threshold.
Gifts are taxed at a rate of 20% on the amount exceeding the accumulated threshold of JPY 25 million. The amount of gift tax, if any, will be treated as a prepayment of tax against a future inheritance tax liability.
Valuation of the gifted assets will freeze at the time of the gift for the inheritance tax calculation.
Those who made this election will automatically be subject to the inheritance tax filing regardless of the situation at the time of inheritance.
There is a special system where the taxpayer can make an irrevocable election to integrate inheritance and gift tax when certain conditions are met.
Under the special system, referred to as 'settlement of taxes at the time of inheritance':
Qualified transfers are those from lineal ascendants who are aged 60 years and older made to their lineal descendants who are aged 20 years or older.
Gifts of up to a total of JPY 25 million will be exempt from gift tax. Several gifts can be made tax-free as long as the total gifts do not exceed the JPY 25 million threshold.
Gifts are taxed at a rate of 20% on the amount exceeding the accumulated threshold of JPY 25 million. The amount of gift tax, if any, will be treated as a prepayment of tax against a future inheritance tax liability.
Valuation of the gifted assets will freeze at the time of the gift for the inheritance tax calculation.
Those who made this election will automatically be subject to the inheritance tax filing regardless of the situation at the time of inheritance.
:
:
This Guide to Japanese Taxes, English and Japanese Tai-Yaku 対訳, is now a little dated:
https://zaik.jp/books/472-4
The Publisher is not planning to publish an update for '23 Tax Season.
:
This Guide to Japanese Taxes, English and Japanese Tai-Yaku 対訳, is now a little dated:
https://zaik.jp/books/472-4
The Publisher is not planning to publish an update for '23 Tax Season.
Re: Early Inheritance - Any Experience?
Yes, I used it 8 years ago and it went smoothly. Just one thing to note: You have a certain period to do it after receiving the gift. The paperwork is a bit complicated and takes, if I remember correctly, about two weeks (you have to visit a couple of administrations, including the Ministry of Justice, to get their hanko). So you have to be careful not to be late. Being the type to procrastinate, I did it at the last minute and finalized the day before the deadlinee! It's better to do it right after receiving the gift to avoid unnecessary stress.
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northSaver
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Re: Early Inheritance - Any Experience?
I have another question which is somewhat related. If an elderly parent (let's say a mother so I don't have to keep saying he/she) gifts her children her house (main residence) in the UK, then I wonder what the tax implications are in Japan? In the UK the house will still eventually be included in IHT calculations if she continues to live in it and doesn't pay her children market rent. Otherwise it will be free from IHT after seven years. I believe the house value for IHT and CGT calculations will be the value when it was gifted, not the value when she dies. The transfer of ownership is free of stamp duty if there is no outstanding mortgage on the house. I'm not sure if the extra IHT deduction for inheriting your parent's main residence applies or not in this case.
But what about Japan? Will the value of the house less the 2500 man deduction be subject to gift tax at the time of transfer? And will the CGT value be "reset" to the transfer value? Or remain as the value at the time she bought it due to no money changing hands at the time of transfer?
I'm not sure this is a good idea, by the way. There are pros and cons. One pro is that if she suddenly has to move to a care home then maybe we could rent her house to help pay the care home fees. It would be less hassle and stress if we were the landlords and not her. One con is that if one of the children's marriages became sour then the house might have to be sold to cover divorce settlements, so she would lose her place to live.
But what about Japan? Will the value of the house less the 2500 man deduction be subject to gift tax at the time of transfer? And will the CGT value be "reset" to the transfer value? Or remain as the value at the time she bought it due to no money changing hands at the time of transfer?
I'm not sure this is a good idea, by the way. There are pros and cons. One pro is that if she suddenly has to move to a care home then maybe we could rent her house to help pay the care home fees. It would be less hassle and stress if we were the landlords and not her. One con is that if one of the children's marriages became sour then the house might have to be sold to cover divorce settlements, so she would lose her place to live.
Re: Early Inheritance - Any Experience?
VG1 (or indeed anyone else with experience) - would it be possible to give a bit more clarification on your experience please? You said: "The paperwork is a bit complicated and takes, if I remember correctly, about two weeks (you have to visit a couple of administrations, including the Ministry of Justice, to get their hanko)." I'm assuming in your case the money came from a relative based outside of Japan? In which case they wouldn't be on the family register in Japan so what proof do you need to provide of your relation to the donor? Birth certificate I presume? Which you would then need to get (officially) translated into Japanese? Any other documentation you can think of that was required? And going to the Ministry of Justice?! I don't live in Tokyo so sounds like a real pain! Sorry, any other advice would be very much appreciated otherwise will be calling the local inaka tax office who I imagine will not have a clue!!!