Question Getting affairs in order... Inheritance tax?

Looks like if I pass away now, my wife would have to pay some sort of inheritance tax on our house, as I understand we need to be married for 20 years for her to almost fully receive it tax-free.

And even then, it's only exempt up to 20 million yen after that period has lapsed. If the house is valued at, say, 30 million yen at the time of passing (let's just say this week), would she have to pay taxes on the 30 million yen to keep the house?

I know buildings depreciate after the 48 year mark so that should "devalue" the value of the house to where she shouldn't pay taxes on it... right?

If not, could I form a GK, put the house into a GK, pay taxes to incorporate the GK, and pass the GK ownership to her instead? Or would that end up costing even more in the long-run?

I'm trying to see how much I should save in excess to pad the tax bill on the house, if any, as it seems crazy to not be able to fully pass on to a spouse.

Thanks!

I don't actually know much, and am certainly not a lawyer/CPA/税理士. Something else I've heard, separate from these links, is that a spouse gets a ¥160M exemption (<–true?). And in another direction, real estate is supposedly one of the few ways in which the rich can get some tax relief--real estate has a 'tax value' apart from market value, and something about the way that it all works for inheritance is a net positive for the person inheriting it. (And depreciation varies on construction type--wood is fastest to zero; concrete takes about twice as long.) Separately again, there is no step-up in cost basis here (as in the US), you inherit the actual value (e.g., of a stock), and pay (maybe) inheritance tax on that, but if you sell that for a profit (capital gain), you are again taxed on the full gain--but one good point is if you sell that within three years you can use any inheritance tax paid on it to step up its basis, so you are at least not completely taxed twice (if you'd paid inheritance tax). I've never heard of companies being used here for tax planning, tho that's probably just my narrow range of experience.

These should get you started:

johnnyG said:

These should get you started:

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The retirewiki was most helpful for spouse preparedness only.

Seems as if she'd be in the clear to inherit the house without tax due.

If you are an average person with average assets, you shouldn't be thinking about doing anything drastic or risky or complicated to avoid one or the other spouse from paying inheritance tax. In Japan, the spouse gets the special benefit of a 160,000,000 tax exemption on inheritance (as mentioned in the Reddit article).

You shouldn't be considering transferring assets unless your assets are well over 100 million yen. Also, the value of the real estate will be based on the assessed value for fixed asset tax (real estate tax). This value is far less than what you paid for the real estate, so even if you paid 100 million yen for the house, the tax-assessed value would probably be less than 50,000,000 yen. It sounds like you've already bought a house, so you will know the assessed value because it shows on the real estate tax bill you get every year from your city/ward.

In short, don't worry. If you are young, its better to worry about life insurance. If you are old, and your house is less than 160,000,000 in assessed value, you shouldn't worry about anything at all except for your wife's ability to take care of herself after you are gone (probably a mix of insurance, investments, cash, and nenkin).

If you have kids, the above calculations all change, but in most cases the inheritance tax rules become even more generous.

Majestic said:

It sounds like you've already bought a house, so you will know the assessed value because it shows on the real estate tax bill you get every year from your city/ward.

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I didn't pay attention to that as it was my first time this year (fully owning); I just scanned the QR code and paid the bill -- I think it was like 50,000 yen or something.

Majestic said:

In short, don't worry. If you are young, its better to worry about life insurance.

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Got it too.

Just wanted to set aside a little slush fund in case there were to be taxes on the house so that could be settled. But, it doesn't look like that's necessary, not as if that's not going to make me not save any more money than I already am.

I hope to be above 100,000,000 in net worth in the next 5 years (and hopefully double that in the following decades), but at that point, I believe my wife and kids will be just fine with whatever is left over after taxes.

Sounds good. Hang on to that tax notice. If you haven't kept it, then hang on to it next year when it comes around.
Real estate tax is around 1.4% of the assessed value of the property (more or less). Then, there is a further 0.3% city planning tax (in Tokyo, anyway), so the total comes out to about 1.7% of the assessed value of the land + building.

A real estate tax bill of 50,000yen means the assessed value of your property is around 3,000,000 yen. Anyway, this will be listed on the tax notice. Its important when you are trying to spitball your spouse's potential inheritance tax liability.

Majestic said:

A real estate tax bill of 50,000yen means the assessed value of your property is around 3,000,000 yen. Anyway, this will be listed on the tax notice. Its important when you are trying to spitball your spouse's potential inheritance tax liability.

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Paid multiples and multiples of that. So, off the bat, lost all my hair. Turns out, my life insurance is worth more than my house now... which is odd when you compare the States to Japan. There, homes are sky high while a life insurance plan might be a ratio of 1:1 (home : plan) in a small town to above 1:10 in a city.

I'll need to see the assessed value to know for sure now, wherever the bill is filed away.

House values here in Maine have gone insane. Paid around $85,000US for my house. The exact twin house next door just sold for $380,000 and it's a single story the size of a 2 car garage with very little land with it. I'm not looking forward to when the city revalues homes for taxes.

Uncle Frank said:

House values here in Maine have gone insane. Paid around $85,000US for my house. The exact twin house next door just sold for $380,000 and it's a single story the size of a 2 car garage with very little land with it. I'm not looking forward to when the city revalues homes for taxes.

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If this law has taken effect supposedly you can freeze your tax liability and enjoy the value appreciation without the tax increases that usually go with it.

okinawaholic said:

I didn't pay attention to that as it was my first time this year (fully owning); I just scanned the QR code and paid the bill -- I think it was like 50,000 yen or something.

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Since you're a homeowner now, I'd suggest getting file box and folders to fit for holding onto records like this. Taxes, improvements, insurance and so on (also mortgage & payment records if you have one). Keep records of your major appliances there, too--purchase receipts and guarantees--and the manuals so if you happen to get an error code 3-10 years from now you'll have something to refer to.

johnnyG said:

Since you're a homeowner now, I'd suggest getting file box and folders to fit for holding onto records like this. Taxes, improvements, insurance and so on (also mortgage & payment records if you have one). Keep records of your major appliances there, too--purchase receipts and guarantees--and the manuals so if you happen to get an error code 3-10 years from now you'll have something to refer to.

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They're all in a fireproof safe already, with other documents and identification. The appliances, I didn't think of, and are in the boxes they were bought in (besides my wife's 300,000 yen fancy washer/spin-for-100-hours-dryer combo, which I don't know where is anymore).

Pretty boring safe if you want to break into my home and take it, not saying it wouldn't be a pain to replace the documents though... So, if someone ever does, know this in advance: please just drop it back off at my doorstep the next day, and no problems be had.