What Is Inheritance Tax?
Inheritance tax is imposed on the total value of assets received by heirs upon someone's death. Japan has one of the highest inheritance tax rates in the world, with a progressive structure reaching 55% on inherited assets exceeding 600 million yen. The basic exemption is 30 million yen plus 6 million yen per statutory heir. For a family with a spouse and two children, the exemption totals 48 million yen, meaning estates below this threshold owe no inheritance tax.
Impact on Investment Portfolios
Listed securities are valued at the lower of four prices: the closing price on the date of death, or the average closing price for the month of death, the preceding month, or two months prior. This rule can work in the heir's favor during market downturns. Real estate is typically assessed at 70-80% of market value through the fixed-asset tax valuation, making it more tax-efficient to hold than liquid securities in many cases. Life insurance proceeds receive a separate exemption of 5 million yen per statutory heir.
Key Considerations
Early planning is essential. The annual gift tax exclusion of 1.1 million yen per recipient allows gradual wealth transfer over decades. A parent gifting 1.1 million yen annually to each of three children transfers 33 million yen tax-free over 10 years. However, gifts made within 7 years of death are added back to the estate for inheritance tax purposes under the 2024 reform (previously 3 years). Consulting a tax professional well before the need arises is the single most effective step.