RetireJapan

Hi everyone,

Does anyone have the experience of setting up an education trust in Japan (a Japanese trust where a parent or grandparent can contribute up to Y15 million for use in a child’s educational expenses)?

I have an elderly parent in the UK, and partly considering the UK’s 7- year rule for IHT, I am wondering if this is worthwhile. Of course, I could get them to pay for individual expenses each time they occur (and paying for educational expenses does not incur gift tax), but asking an elderly person each time an expense comes up might feel troublesome for them.

Have any of you used this education trust? How have your experiences been? Have you had additional paperwork due to the donor living abroad? How easy is the system to use?

I myself feel there are drawbacks, including the fact that the money must stay in the bank and cannot be invested, which is an issue when you have inflation. At the same time, education can be quite expensive, especially from teenage age to university. So what do you feel, guys?

You need a bank that supports it like SMBC. https://www.smbc.co.jp/kojin/kyouikushikin/

My wife's parents preferred the idea of yearly payments under the gift tax maximum of 1.1 million, which we used along with Junior NISA (RIP) and taxable investments. *

*There is some grumbling about the tax issues with this as technical the parent is the custodian, and some paranoid tax professionals recommend paper contracts between all parties. But, babies and toddlers cannot sign contracts...

IloveJapan wrote: ↑Sun Dec 17, 2023 3:28 pm Does anyone have the experience of setting up an education trust in Japan (a Japanese trust where a parent or grandparent can contribute up to Y15 million for use in a child’s educational expenses)?

My impression is this is a way to reduce inheritance tax and hedge against someone dying before they give the money to the child.

If the person is not likely to die, better to give the child 1m yen a year with no strings attached.
If the person does not have a large estate that will be taxed a lot, perhaps not worth bothering with.

Thank you for your feedback…so SMBC are OK with oversea parents are they? Thank, I might give them a call in the New Year then.

I do wonder how time-consuming the related paperwork is, if you set up this system, and whether some foreign parents have found it worthwhile

In Japan, no 7 year rule would apply as it is education expenses.

But the UK would apply it’s 7 year rule

As an aside, I think tax free gifts (up to 1.1. Million yen a year) can be given in addition to having an education trust. At least based on reports I have seen.

There are several conditions for Educational Trust:

Child or Grandchild
with Total Income amount in the previous year of Y10M or less

When the recipient reaches 30, any remaining balance will be treated as a gift and taxed accordingly.

It may have ended in March 2021 ???

Unfortunately, I called SMBC today and they told me that for their education trust, the donor has to live in Japan. So now I have to look again for an institution that accepts the donor living outside Japan