Family constitution vs Civil Codes

Generally speaking, after the World War II, the winner countries were worried about the Japan’s recovery in terms of its economy. Especially wealthy families were potential powers.

Therefore, after the Shoup Report recommended Japanese governments’ reconsideration of its tax system, the government imposed the high inheritance tax ratio, This hit influential families and they have, still now a days, been taking various counter measures to avoid high inheritance tax, while controlling their family businesses.

One of the issues involved in this succession planning is the legally secured portion in case family assets are inherited to the first son according to the family constitutions or the will of the family top. Under Japanese Civil Code, each successor has its own legally protected portion and can also require that portion in case his/her potion is eroded, he/ she can claim to secure its protected potion. Even though the family constitution stipulates the rules of succession, the right secured under the Civil Code prevails.

To prevent the action from the successor who wants to protect the portion, the family top or other successor adopt sons or daughters, or encourage that successor beforehand to claim his/her protected portion. However, most of the cases, the litigations seem to be prolonged and more complicated and therefore, such counter measures are not recommended.

The important thig here is that the family top manages the relations of families and relatives. Then he should plan the inheritance, considering the secured potions. The straightforward approach is that the successor pays the inheritance tax, succeeds all the family assets and liabilities, and financially compensates other successors who are not happy with this succession plan. I know this is not so easy as we analyze, however, as long as the next successor sincerely and honestly keeps talking with counterparts, I feel the arguments will, at the end of the day, end within a peace.

Should you have any queries or doubts, in terms of inheritance tax in Japan, please let me know.