Does the estate have to be divided according to the legal inheritance?

Aki Japan Tax Services | Your Income and Corporate Tax Specialists | Does the estate have to be divided according to the legal inheritance?

Author Aki Kojima

Certified Public Tax Accountant with an MBA, member of the Association of Micro M&A Professionals, and licensed real estate agent. I provide tax advisory services, asset management consulting, and support for business owners, freelancers, and sole proprietors. I have extensive experience in international sales, accounting, labor relations, recruiting, and IT management. In addition to my professional work, I write articles and books on taxation and financial education. I enjoy swimming, reading, photography, and spending time in nature with my two children.

January 20, 2024

January 20, 2024

An estate does not have to be divided according to statutory inheritance. Statutory inheritance is the law that determines the order and rights of heirs, but the method of dividing an estate can vary depending on individual circumstances. It is also possible to create a will and designate an estate to specific heirs, such as spouses or children. It is also essential to choose an appropriate method of dividing the estate, considering factors such as inheritance taxes.

Key Points

  • An estate need not be divided according to the legal inheritance.
  • Creating a will and designating the estate to specific heirs is possible.
  • Choose the appropriate method of dividing the estate, considering factors such as inheritance taxes.
  • It is essential to seek professional advice in making arrangements for the division of the estate.

What is legal inheritance?

Statutory inheritance is the law that determines the order and rights of heirs. An estate need not be divided according to legal inheritance, but legal inheritance protects the rights of heirs. Family members, such as spouses and children, are considered priority heirs. Statutory inheritance applies, especially when no specific method of dividing the estate exists. However, statutory inheritance can be modified by a clear statement of intent from a will. Specific rules regarding the division of property and the treatment of inheritance taxes vary depending on individual circumstances, so it is essential to consult a specialist.

Order of Heirs

The order of heirs is an essential factor in statutory inheritance.

Spousal Rights

In legal inheritance, the spouse has a special status and is entitled to half of the inheritance. The rights of the spouse remain the same even if there are children. In other words, the spouse is entitled to half of the inheritance. However, in some cases, children may be entitled to a particular share of the inheritance. For a spouse to exercise their right to receive an inheritance, they have the highest priority among the heirs and must proceed according to the order of succession.

Rights of Children

Children have special rights in statutory inheritance. If you have children, they have the same rights as your spouse and are entitled to receive half of the inheritance. However, if there is more than one child, half of the inheritance must be divided equally among the children.

Effectiveness of a Will

A will plays a vital role in the division of an estate, but its validity is subject to certain conditions. First, the will must be made in person and formalized. In addition, the will must be worded and signed and meet specific requirements. To ensure the validity of a will, it is important to consider preparing a notarized or self-written will. Although a will may take precedence over a statutory will, it is necessary to ensure its validity to facilitate the division of property.

How to Prepare a Will

There are several ways to prepare a will. First, a notarized will is ready at a notary public office in the presence of a professional notary. At the notary public’s office, you can also receive advice on the preparation and content of your will. On the other hand, if you choose to make a self-written will, you will write your will by hand. It is essential to address and date your property’s will and specifics and designate your heirs. The more precise the description, the more influential the will will be.

Contents and Limitations of Wills

A will can be drafted with any content, but some restrictions exist. For example, a will can leave a portion of the estate, but it cannot be used to accumulate necessary expenses such as living expenses or repayment of debts. In addition, the will must be consistent with the statutory inheritance concerning the extent of the inheritance. Furthermore, while it should be drafted as a bearer deed, it can also be drafted as a secret that will be disclosed only to specific heirs.

Inheritance Tax Prevention Methods

The key to estate tax prevention methods is to minimize the estate’s value. Below are some of the ways to prevent estate taxes

Gifts: There are annual deductions, and giving gifts during your lifetime can reduce the amount of your estate inherited at one time.

Take advantage of living wills: You can take advantage of estate tax exemptions and deductions when you make gifts during your lifetime.

Take advantage of taxation systems: You may reduce inheritance taxes by taking advantage of valuation reductions on your home, for example.

These measures can be used to reduce inheritance taxes. However, we recommend consulting with a tax attorney or lawyer since the most appropriate method will vary depending on the individual case.

What is an inheritance tax?

An inheritance tax is imposed on heirs when they inherit an estate. In Japan, inheritance tax is levied based on the value of the property the legal heirs inherit. The inheritance tax rate varies depending on the succession of heirs and the value of the inherited property, and a significant amount of tax must be paid when a large inheritance is inherited. However, by utilizing inheritance tax planning methods, taxes can be saved. Take appropriate measures with the advice of a tax accountant or lawyer.

Inheritance tax is calculated based on the value of the inherited property. First, the total value of the entire inheritance is calculated, and then the inheritance share of the closest relatives among the heirs is subtracted from the total value. On the deducted amount, a tax is payable, calculated by applying the inheritance tax rate. However, tax exemptions and deductions are available for inherited property, which can be used to reduce inheritance taxes. Calculating inheritance tax requires specialized knowledge, so seeking advice from a licensed tax accountant or lawyer is essential.

Inheritance Procedures

Determination of Heirs

The first step in the inheritance process is to determine the heirs. To determine the heirs, it is necessary to check the family register and family tree. First, the order of legal heirs, such as the spouse and children of the deceased, should be confirmed. If there are no legal heirs, the existence of a will or inheritance agreement is also checked. Once the heirs are determined, those people are notified and prepared for the next step.

Valuation and division of property

The next step in the inheritance process is the valuation and division of the estate. Once the heirs have been determined, the estate is evaluated. This includes property valuation, such as real estate, deposits, stocks, and insurance. Next, the estate is divided among the heirs. If there is more than one heir, the method and proportion of division must be decided. The division is usually done by negotiation, but court mediation may be necessary if an agreement cannot be reached. The valuation and division of property are essential to ensure a fair and equitable process.

An attorney should be retained if a trial or other court action is required. Negotiations can be time-consuming and expensive.

A tax attorney will be hired to calculate inheritance taxes if there is no dispute and the estate is over a certain amount.

Conclusion

It is not necessary to divide the estate according to the legal inheritance, but the proper procedures must be followed to respect the rights of the heirs. The basic rule is to divide the estate according to the order of heirs, but you can also clearly express your wishes by making a will. It is also essential to prepare for inheritance taxes, and planning can reduce the burden of inheritance taxes. Understanding the process of inheritance procedures and evaluating and dividing property fairly and equitably is essential. We will select a method of dividing your estate according to various circumstances, so please get in touch with us if you are considering this option.

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