Inheritance is an important procedure to pass on property and legacy to the next generation, though,Failure to prepare can lead to problems among remaining family members and an unexpected tax burden that can be heavy.Early action is essential for a smooth inheritance. In this article, an administrative scrivener qualified as an advanced inheritance diagnostician will provide advice on how to prevent family disputes and minimize taxes. Together, we will discuss what you can do now to protect your valuable assets and your family's future.
The tax statements in this article are intended to introduce general basic knowledge.
Consult a tax attorney for individualized and specific inheritance tax advice and calculations.
Each of the programs discussed in this article has individual requirements. Consult with a specialist to determine the best course of action.
People who should read this article
People who want to know basic knowledge about inheritance.
People who are not sure if they need estate planning
People who want to take measures to prevent their families from having a dispute after their death.
People who have aging parents and want to start thinking about inheritance planning.
Do you need an inheritance plan?
Inheritance measures include "measures for dividing the estate" to ensure smooth and amicable inheritance within a limited time frame, and "inheritance tax measures" to ensure that important assets are passed on without loss.
In particular, there is a possibility of inheritance disputes in the following cases. If necessary, take action as soon as possible.
- There are assets subject to inheritance tax.
- Many people say, "We don't have any property," or "The only property we have is our house. However, when you actually look into it, you will find thatUnexpected events often occur, such as "the value of my home has increased more than I expected," or "I thought it was not a large amount, but there were few heirs and a large amount of inheritance tax was levied."
First, check how much your property is worth and whether it is subject to estate taxes.
- Many people say, "We don't have any property," or "The only property we have is our house. However, when you actually look into it, you will find thatUnexpected events often occur, such as "the value of my home has increased more than I expected," or "I thought it was not a large amount, but there were few heirs and a large amount of inheritance tax was levied."
- There are two or more heirs.
- If there are two or more heirs, it is essential to take measures to divide the estate.Blood and money" can lead to unexpected conflicts even within close-knit families.In many cases, disputes arise due to the opinions and meddling of people not directly related to the inheritance, such as spouses of children, distant relatives, etc.
- If there are two or more heirs, it is essential to take measures to divide the estate.Blood and money" can lead to unexpected conflicts even within close-knit families.In many cases, disputes arise due to the opinions and meddling of people not directly related to the inheritance, such as spouses of children, distant relatives, etc.
- There are children between divorced spouses.
- In many cases, inheritance relationships are complicated when there are children with a spouse from a previous marriage or when there are numerous siblings.It is necessary to consult an expert to properly confirm who will be the heir.
Five points of inheritance measures
1. measures to reduce the assessed value of property
In principle, property valuation for inheritance and gift tax purposes is based on "market value. However, since it is not easy to ascertain "market value" objectively, property valuation is based on the "Basic Notification on Property Valuation" in order to calculate the valuation amount in a simplified manner. As a result, the valuation amount differs depending on the type of property even if the market value is the same.
Measures to reduce the assessed value of inherited property by taking advantage of this difference in the assessed value of different types of property are measures to reduce the assessed value of inherited property. Specifically, the following measures are available
Utilize life insurance
Life insurance death benefit has a tax exemption of "5 million yen x number of legal heirs.Therefore, it is effective to use life insurance as a measure against inheritance tax. For example, if there are three legal heirs, a maximum of ¥15 million is exempt from taxation.
- point:Converting some assets to life insurance rather than holding assets in cash that would be subject to estate taxes.and you can take advantage of the tax exemption when the inheritance occurs and reduce your estate.
Effective use of real estate
Real estate tends to have a lower assessed value than cash or stocks.In particular, home and rental real estate can significantly lower assessed values. For example, if you own a rental condominium, your property tax assessed value and inheritance tax assessed value will be reduced if you rent it out.
- pointPurchase of rental property: Converting cash and other assets into real estate can reduce the assessed value of the property at the time of inheritance, thereby reducing the burden of inheritance taxes.
Use of Special Exception for Small Building Lots, etc.
If the land acquired by inheritance was the decedent's residential or business land, there is a special exception that allows for a substantial reduction in the assessed value of the land if certain conditions are met. In some cases, the assessed value of the land can be reduced by up to 80% for residential land and by up to 50% for business land.
- pointThe special exception for inheritance of a home reduces the assessed value of the land significantly, thereby reducing the inheritance tax burden. However, there are detailed conditions for the application of this special exception, so it is important to check with a specialist beforehand.
Utilizing the Business Succession Taxation System
When small business owners pass their businesses on to the next generation, by meeting certain conditions,This system allows for a reduction or deferral of inheritance taxes on business assets and stocks.This can reduce the estate tax burden if there is an intention to continue the business.
- pointThe taxation of business successions requires advance preparation and planning. In particular, business owners with shares can expect a significant reduction in inheritance taxes by taking advantage of this tax system.
increase one's debt
Since the amount of inherited property minus liabilities is subject to taxation, this technique is used to increase liabilities and lower the assessed value of property by borrowing and investing in real estate. This is considered in conjunction with the effective use of real estate described above. By purchasing real estate for lease and taking out a loan, cash can be converted into real estate, lowering the assessed value of the property and increasing the debt.
- pointNote: Strategies to increase debt also involve risk and require careful planning. It should also be part of effective asset management, not simply increasing debt.
Accurately calculate the assessed value of your property
The tax office will calculate the value of your property, but an accurate estimate may result in a lower valuation than expected. It is especially important to ask a specialist to properly value real estate, stocks, antiques, etc.
- pointThe first step in inheritance tax planning is to have a professional evaluate your property in advance to ascertain an appropriate valuation to avoid overvaluing your property.
summary
The measures to draw down the inheritance are,Planning.is the key. By utilizing prenatal measures and tax-saving tools, it is possible to significantly reduce the inheritance tax burden. However,Each method has its own legal requirements and risks, so it is important to proceed with caution and in consultation with experts.
2. property transfer measures
A method of transferring assets by gift or other means. One method is to donate assets that will appreciate in value or generate income in the future by selecting "gifts under the calendar year taxation system" or "gifts under the taxation system for settlement at the time of inheritance.
Take advantage of gifts made during your lifetime
This is a method of reducing assets at the time of inheritance by gradually gifting assets during one's lifetime. In the "calendar year gift system,"Up to ¥1.1 million per year can be gifted tax-free.Therefore, if planned for, it can reduce the amount of property subject to inheritance tax.
In addition, the "taxation system for settlement at the time of inheritance" can be used.Up to a cumulative total of 25 million yen (plus 1.1 million yen per year) can be transferred without being subject to gift taxIn both systems, the assessed value is the "value at the time of the gift. In both systems, the "value at the time of the gift" is the assessed value, so even if the value of the property increases after the gift, it will be advantageous in the calculation of inheritance tax.
3.Drafting a Will and Testament
To avoid family disputes in inheriting real estate, it is important to prepare a will. By specifying in the will how real estate will be divided, you can prevent problems between heirs and ensure a smooth inheritance.
4. securing tax payment funds
Inheritance tax must be paid in a lump sum in cash. While implementing the above measures to reduce valuation and transfer assets, it is necessary to prepare how to pay the tax in the event of an emergency.
Use of life insurance
For those whose real estate comprises the majority of their estate, they may have to dispose of the real estate they own when an inheritance occurs with few financial assets. They may be forced to sell their ancestral home or may not be able to sell it quickly even if they wanted to. By purchasing life insurance, the death benefit received by the heirs can be used to pay inheritance taxes.
Consider utilizing this along with the property reduction effect described above.
Securing tax payment funds for each heir
Funding for the payment of inheritance taxes must be provided for each heir. The person who inherits property must pay the inheritance tax on that inherited property. If another heir pays the tax instead, he or she is subject to gift tax.
Special Exception for Addition to Inheritance Tax Acquisition Costs
When it is not possible to pay inheritance tax in cash, inheritance tax may be paid by selling real estate or other property. If property acquired by inheritance, etc. is sold within three years from the day after the date following the start of inheritance to the day after the deadline for filing inheritance tax returns (within 10 months from the day after the day when the taxpayer learned of the start of inheritance), the "Special Exception for Addition to Inheritance Tax Acquisition Costs" may be applied.
This special exception allows a portion of the inheritance tax on transferred inherited property to be regarded as acquisition cost in the calculation of transfer income for income tax and inhabitant tax purposes. As a result, the transfer income becomes smaller, which has the merit of reducing income and inhabitant taxes.
Special provisions when selling a decedent's residential property (vacant house)
If an individual who has acquired by inheritance a property that was the decedent's residence or its site immediately prior to the commencement of inheritance transfers it, the 30 million yen special exemption for income from transfer of residential property can be applied to the amount of income from the transfer.
For more information, see the article below.
5. measures to divide the estate
If most of the inherited property is financial assets, the heirs can divide it equally, but if most of the inherited property is real estate, it is difficult to divide it equally, and there is often a large disparity among the heirs.
Taking steps to adjust for this disparity is important to prevent future estate division problems.
6. use of adult guardianship system
The "adult guardianship system" is a legal system to support people with impaired judgment.Under this system, a guardian provides support for legal actions and daily living to an adult who is unable to make appropriate decisions about his or her own affairs due to mental or physical reasons. The main role of the guardian is to support decision-making regarding property management, medical care, and long-term care.
In Japan, the adult guardianship system includes "legal guardianship" and "voluntary guardianship." In legal guardianship, the family court appoints a guardian, whereas in voluntary guardianship, the individual may designate a guardian in advance. The purpose of this system is to provide necessary support while respecting the rights of the individual.
7.Use of Family Trusts
A "family trust," in which real estate management is entrusted to a trusted family member in preparation for dementia or impaired judgment, is also an effective inheritance strategy. This enables appropriate management of real estate and smooth succession after inheritance.
For more information, see the article below.
summary
How was it?
Estate planning is essential to protect your assets, your family, and your livelihood. These measures are the duty of those who bequeath their assets to the next generation.
Japan has a number of special systems related to inheritance. Many of these systems will not be in place in time if you do not take action early. Make good use of each system.It is desirable to take measures as early as possible with the help of experts to ensure an amicable and smooth inheritance while enjoying your retirement with your family.
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