Many people don’t know or even think about inheritance laws until they are affected by them. They differ by country, and understanding inheritance laws in your native country can be challenging enough, let alone those of a country you’ve moved to. If you’ve settled in Japan, understanding inheritance laws and taxes can seem intimidating, and the language barrier plus the legal jargon make it confusing even if you have good Japanese skills. Here is some guidance on navigating inheritance in Japan so that if you are an heir, you can receive your fair share.
The Basics
First and foremost, the inheritance laws that apply depend on the nationality of the person who dies or the decedent. According to Article 36 of the Act on General Rules for Application of Laws, “inheritance is governed by the national law of the decedent.”
This means that Japanese law will govern if the decedent is a Japanese national, and if they are not, then the laws of the decedent’s country of nationality will apply. So, if you are a foreigner living in Japan, the laws in your country of citizenship will govern.
If the decedent is a Japanese national and leaves a will, the will divides the inheritance among the heirs. Otherwise, Japanese law determines the distribution of inheritance.
Heirs and Line of Succession
If there is no will or if the division among heirs is unclear, the co-heirs should ideally agree on how to divide the inheritance. If they cannot reach an agreement, Japanese law will determine the line of succession.
Spouse
If the decedent has a spouse, the spouse will be the statutory heir. It is not possible to disinherit your spouse. A partner to whom the decedent was not married or an ex-spouse will not be included.
Children
If there are children, the spouse will receive half the inheritance and the children will receive the other half. This half will then be divided evenly among the children. For example, if a spouse and two children survive the decedent, each child will inherit a quarter of the inheritance. If the decedent has no spouse, the entire inheritance will pass to their children and be divided accordingly.
All of the decedent’s children will have the same right to inheritance. This also includes adopted children and children born outside of marriage.
If the decedent is predeceased by their children but has grandchildren or great-grandchildren, then the inheritance will pass to them in the same way it would pass to their children.
Parents and Grandparents
If the decedent has a spouse but no children, then the spouse will receive ⅔ of the inheritance and the parent or parents will receive ⅓. If the decedent has no spouse, the entire inheritance will pass to their parents. In the instance that the decedent has no living parents but has a living grandparent or grandparents, then the inheritance will pass to them in the same manner.
Siblings
Unfortunately, siblings are the very last in the line of succession. If the decedent has a spouse but no children, living parents or grandparents, then the spouse will receive ¾ of the inheritance and the sibling or siblings will receive ¼. Without a spouse, the entire inheritance will go to the siblings. In the case that there aren’t any living siblings but there are nieces or nephews, the inheritance will pass to them.
No Statutory Heirs
If the decedent dies without any close family, then the court will need to appoint an administrator to manage the inheritance and determine heirs.
Keep in mind that this line of succession only applies if the decedent didn’t write a will and if the heirs cannot reach an agreement on the designation of inheritance. Otherwise, the will or an agreement will decide who is to inherit what. If there is still some dispute among the heirs based on the above inheritance procedures, then the heirs can petition to the family court to divide the inheritance.
How Heirs Are Taxed
In many countries, the estate as a whole is taxed before it is distributed among the heirs, but in Japan, the heirs themselves are taxed based on their share of the inheritance.
The amount of basic tax exemption is ¥30 million + ¥6 million x the number of heirs. For example, if the co-heirs are the decedent’s spouse and one child, the basic exemption is 42 million yen. The amount of the inheritance above this number is taxed based on the table below.
| Amount received as statutory inheritance share | Tax rate | Deduction |
|---|---|---|
| ¥10,000,000 and below | 10% | – |
| Over ¥10,000,000 to ¥30,000,000 | 15% | ¥500,000 |
| Over ¥30,000,000 to ¥50,000,000 | 20% | ¥2,000,000 |
| Over ¥50,000,000 to ¥100,000,000 | 30% | ¥7,000,000 |
| Over ¥100,000,000 to ¥200,000,000 | 40% | ¥17,000,000 |
| Over ¥200,000,000 to ¥300,000,000 | 45% | ¥27,000,000 |
| Over ¥300,000,000 to ¥600,000,000 | 50% | ¥42,000,000 |
| Over ¥600,000,000 | 55% | ¥72,000,000 |
How Can I Avoid Inheritance Tax in Japan?
The Japanese government imposes a high inheritance tax compared to other countries, but there are ways to minimize or mitigate it. Here are some strategies that people commonly use:
1. Gift Tax Exemption (生前贈与 – Lifetime Gifts)
- Japan allows annual tax-free gifts of up to ¥1.1 million per recipient.
- Parents often transfer assets to children over many years to reduce the taxable estate.
- However, large lump-sum gifts given within three years before death are still subject to inheritance tax.
2. Education Funds Exemption (教育資金贈与)
- You can set up an educational fund of up to ¥15 million per child or grandchild, which is tax-free if used for education.
3. Marriage and Childcare Fund Exemption (結婚・子育て資金贈与)
- Parents or grandparents can give up to ¥10 million per recipient for marriage or child-rearing expenses without incurring tax.
4. Spousal Exemption (配偶者控除)
- A spouse can inherit up to ¥160 million tax-free, or their legal inheritance share (whichever is larger).
- This significantly reduces tax liability for a surviving spouse.
5. Life Insurance Payouts (生命保険)
- The insurance payout amount is partially tax-free:
¥5 million × the number of heirs is exempt from inheritance tax. - Many people buy life insurance to shift wealth tax-efficiently.
6. Real Estate Investments
- Real estate is valued lower for inheritance tax purposes than cash.
- Some people convert assets into rental properties to reduce taxable value.
- Land inheritance can also qualify for reduced valuation if heirs continue to live on or use the property.
7. Transferring Business Assets (事業承継税制)
- If inheriting a family business, Japan offers tax deferrals or exemptions under certain conditions.
- Heirs must continue running the business for a specified period.
8. Setting Up a Trust (信託)
- Certain types of trusts can help distribute assets tax-efficiently.
- Special legal structures can provide financial benefits while keeping wealth within the family.
9. Moving Abroad Before Death
- Japan taxes worldwide assets if the deceased lived in Japan for at least 10 of the past 15 years.
- Moving overseas and cutting tax residency before death can eliminate inheritance tax on foreign assets.
If your inheritance exceeds the basic exemption amount, you must declare and pay the inheritance tax within 10 months and a day of learning about your inheritance.
There are also tax credits that can be applied to an heir’s share.
- Foreign tax credit: if the inheritance is also taxed in another country, a foreign tax credit may be applicable
- Spousal credit: A spouse’s share of the inheritance will not be taxed if the value is below ¥160 million.
- Minors credit: For children under 18, the tax credit is ¥100,000 multiplied by the heir’s age.
- Disability credit: For heirs with disabilities, the tax credit is ¥100,000 multiplied by the heir’s age or ¥200,000 multiplied by the heir’s age for special disabilities.
Real Estate
If you are an heir who is also a foreigner or does not live in Japan, this will not prevent you from being able to inherit real property in Japan. If you inherit real estate, you must apply for inheritance registration within three years of learning about your inheritance.
Japanese real estate has a reduced tax valuation. A property’s value is based on roadside land valuation, rosenka (路線価) in Japanese, and is typically about 80% of the fair market value. A larger discount is possible depending on the size and usage of the land. For tax purposes, the property value is about 70% of the fair market value.
Other Considerations
If, for some reason, you wish to renounce your inheritance, you can do so by submitting documents to the family court in Japan. You should complete this within three months of learning about your inheritance, but you can extend the deadline by requesting the family court.
If you live in Japan and plan to stay, it is a good idea to create a will in Japan because it can, unfortunately, be difficult for the heirs of foreigners in Japan to access their inheritance. Making a Japanese will can make the inheritance process much smoother for your heirs.
You can make a holographic (handwritten) will with your signature, date and personal seal. Another option is to create a notary deed will, which is more expensive but is more secure and unlikely to cause disagreements among heirs.
If you have assets in your home country, it is a good idea to create a separate will in your home country that designates the heirs of your non-Japanese assets.
Have you had to deal with inheritance in Japan? How was your experience navigating it? Let us know in the comments!
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I haven’t had any inheritance in Japan. I read and admire this act. It commonly respects the will of owner and target to smoothly settle any disagreement among heirs by lawful methods.
Thank you. This was useful. My husband’s father passed away and left the stock in his company to my husband and I’ve been worried about how much we were going to be taxed. Of course we have a business accountant but he’s been very slow to pass us any information. After reading this I think I have a better idea of what will happen than my husband does, although I still don’t fully understand how much we will be taxed.
It was useful article. I wish there was a bit more detail about inheriting business and stock.