Estate Planning for Long-Married Couples in Japan: What is the New Presumption for Gifts or Bequests of Residential Property Between Spouses of 20+ Years?

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

In Japanese inheritance law, the principle of fairness among heirs often involves a "clawback" mechanism for certain lifetime gifts or bequests made by the deceased to individual heirs. These "special benefits" (特別受益 - tokubetsu jueki), such as significant gifts for marriage, starting a business, or substantial living support, are typically added back to the value of the deceased's estate when calculating each heir's rightful share. This process, known as mochidashi (持戻し), aims to ensure that such advancements are treated as part of an heir's inheritance. However, a notable reform, effective from July 1, 2019, introduced a special presumption under Article 903, Paragraph 4 of the Civil Code, specifically concerning gifts or bequests of residential property to a spouse after a long marriage.

This new provision significantly impacts estate planning for long-married couples by altering how such transfers are treated in the calculation of inheritance shares.

Understanding "Special Benefits" and the "Mochidashi" (Clawback) Principle

Before delving into the new presumption, it's essential to understand the foundational concepts:

  1. Special Benefits (特別受益 - tokubetsu jueki): Under Article 903, Paragraph 1 of the Civil Code, when a co-heir has received from the deceased a gift related to marriage, adoption, or as capital for their livelihood, or has received a bequest (遺贈 - izō), such benefits are generally considered "special benefits." These are essentially viewed as an advance on that heir's eventual inheritance.
  2. Mochidashi (Clawback - 持戻し): To ensure equitable distribution among all co-heirs, the value of these special benefits is typically added back to the deceased's net assets at the time of death. This augmented sum forms the "basis for calculation of inheritance shares" (みなし相続財産 - minashi sōzoku zaisan). Each heir's theoretical share is calculated from this larger notional estate. The heir who received the special benefit then has the value of that benefit deducted from their calculated share of the actual remaining estate.
  3. Exemption from Mochidashi (持戻しの免除 - mochidashi no menjo): The deceased person (the testator or donor) always had the ability to express, either explicitly in their will or implicitly through circumstances, that a particular special benefit should not be subject to this clawback (Article 903, Paragraph 3). If such an "exemption from mochidashi" is indicated, the value of that specific gift or bequest is not added back to the estate for calculating the shares of other heirs. This allows the recipient heir to effectively receive that benefit in addition to their full calculated share of the remaining distributable estate (though this is all still subject to the legally secured portions – Iryūbun – of other heirs, which is a separate consideration).

The New Presumption: Article 903, Paragraph 4

The significant reform is the introduction of Paragraph 4 to Article 903. It states:

"When a decedent, who was one party to a marriage that continued for twenty years or more, has made a gift or bequest of a building used for residence or its land to the other party (the surviving spouse), it shall be presumed that the decedent expressed an intention not to apply the provisions of Paragraph 1 [i.e., not to claw back the gift/bequest for the calculation of inheritance shares]."

Effect of this Presumption:
This article creates a legal presumption of mochidashi menjo (exemption from clawback) specifically for gifts or bequests of residential property made to a spouse in a marriage of 20 years or longer. In practical terms:

  • The value of the residential property given or bequeathed to the long-term surviving spouse is, by default, not added back to the deceased's other assets when determining the notional estate for calculating inheritance shares among co-heirs (e.g., the spouse and children).
  • This allows the surviving spouse to retain the residential property and still be entitled to their full statutory or willed share from the rest of the deceased's estate, without the value of the home diminishing that other share. For example, if the remaining estate is 50 million yen and the spouse's share is 1/2, they would receive 25 million yen from the remaining estate, in addition to having received the home. Without this presumption (and without an explicit mochidashi menjo), the value of the home would have been added to the 50 million, their share calculated from that larger sum, and then the home's value deducted from their entitlement.

Rationale and Policy Aims of the New Presumption

This provision was introduced with several policy objectives in mind, primarily focused on the welfare of the surviving spouse:

  1. Protecting the Surviving Spouse's Residence and Financial Stability: A key aim is to enable an often elderly surviving spouse to continue living in their familiar marital home without facing financial hardship. If the home's value were automatically clawed back, it could significantly reduce or even eliminate their share of other, more liquid assets essential for daily living expenses.
  2. Recognizing Long-Term Marital Contributions: A marriage lasting 20 years or more typically involves a long period of shared life, mutual support, and joint efforts in acquiring and maintaining family assets, including the home. The law acknowledges that the marital home often symbolizes these accumulated joint efforts.
  3. Reflecting the Deceased's Likely Intent: It is generally presumed that when a person gifts or bequeaths the marital home to their long-term spouse, their intention is usually to secure that spouse's housing in addition to providing them with a fair share of other assets, rather than having the home effectively substitute for their share of other assets. Article 903(4) gives legal weight to this presumed benevolent intent.
  4. Conceptual Alignment with Existing Tax Provisions: While legally distinct, this reform conceptually aligns with certain gift tax provisions in Japan that offer exemptions for gifts of residential property between spouses in long-term marriages (such as the spousal gift tax allowance under Article 21-6 of the Inheritance Tax Act), which are also aimed at facilitating the transfer of the marital home and ensuring the spouse's living security.

Conditions for the Presumption to Apply

For the presumption under Article 903(4) to operate, several conditions must be met:

  • Duration of Marriage: The marriage between the deceased and the recipient spouse must have lasted for 20 years or more. This 20-year period is generally considered to be met at the time of the lifetime gift, or at the time of the will's creation for bequests (though ultimately, the status at death is what matters for inheritance).
  • Recipient: The recipient of the gift or bequest must be the surviving spouse of the deceased.
  • Type of Asset: The disposition must concern:
    • A building used for residence (居住の用に供する建物 - kyojū no yō ni kyōsuru tatemono).
    • Or the land upon which such a residential building stands (その敷地 - sono shikichi).
      The property must be for "their residence," implying it's primarily the marital home or intended as such for the spouse. It does not necessarily mean the spouse must have been physically living there at the precise moment of the gift or will, if it was intended for their residential use. For properties with mixed residential and commercial use (e.g., a home with an integrated family shop), the residential portion would clearly fall under the presumption. The applicability to the purely commercial part might depend on the specific facts and the overall intent discernible from the will or gift.
  • Nature of Disposition: The provision applies to both lifetime gifts (zōyo) made by the deceased to their spouse and bequests (izō) made in the deceased's will. It is also important to note that this presumption of mochidashi menjo applies when the newly established (long-term) Spousal Residency Right is bequeathed to a spouse of 20+ years (as per Article 1028(3), which applies Article 903(4) mutatis mutandis).

The Presumption is Rebuttable

Article 903(4) establishes a presumption (推定する - suitei suru), not an irrefutable rule. This means that while the default position is an exemption from clawback for such residential property transfers, this presumption can be overturned (rebutted).

If there is clear evidence demonstrating that the deceased had a contrary intention – meaning they specifically intended for the value of the gifted or bequeathed residential property to be clawed back and counted against the surviving spouse's share of other assets – then the presumption will not apply. Such contrary intent could be explicitly stated in the will (e.g., "I bequeath my house to my spouse, and its value shall be included in the calculation of their inheritance share under Article 903(1)") or, more rarely, might be inferred from other unambiguous circumstances surrounding the gift or will.

Crucial Distinction: Impact on Inheritance Shares vs. Legally Secured Portion (Iryubun)

It is critically important to distinguish the effect of this mochidashi menjo presumption under Article 903(4) from the rules governing the "Legally Secured Portion" (Iryūbun - 遺留分) of other heirs (such as children).

  • Effect on Inheritance Share Calculation: The presumption under Article 903(4) directly impacts how actual inheritance shares are calculated among co-heirs during estate division. It allows the spouse's share of the remaining estate to be calculated without being diminished by the value of the home they received.
  • No Exemption from Iryubun Calculation Base: However, this presumption does not automatically remove the gifted or bequeathed residential property from the pool of assets considered when calculating the Iryubun entitlements of other heirs. The Iryubun system ensures that certain heirs (spouse, children, ascendants) receive a legally guaranteed minimum portion of an expanded estate that includes certain lifetime gifts. The revised Civil Code (specifically Article 1044(3) concerning gifts to heirs in the Iryubun context) does not apply Article 903(3) (explicit mochidashi menjo) or Article 903(4) (presumed mochidashi menjo for residential property) when determining the asset base for Iryubun calculations.

Therefore, even if the residential property given to the spouse is presumed exempt from clawback for share calculation purposes, its value is still generally included when calculating the total estate value upon which other heirs' Iryubun claims are based. If the total value received by the spouse (including the home) infringes upon the Iryubun of, for example, the deceased's children, those children can still assert their Iryubun rights (which, under other reforms, now take the form of a monetary claim).

Interaction with "Sōzoku Saseru" Wills

A point of interpretation arises concerning wills that use the "相続させる" (sōzoku saseru – "to cause to inherit") phrasing to direct specific assets to specific heirs. These are often treated as designations of methods for estate division rather than pure bequests. Whether the presumption in Article 903(4) applies directly or by analogy to residential property passed to a long-term spouse via a sōzoku saseru clause has been a subject of discussion. Given the policy aims of Article 903(4), a strong argument can be made for its applicability, but specific will drafting may be needed for full clarity in such cases.

Transitional Provisions: Not Retroactive

It is important to note that this beneficial presumption is not retroactive. Article 4 of the Supplementary Provisions of the amending act explicitly states that the new Article 903(4) does not apply to gifts (zōyo) or bequests (izō) of residential property that were made before the effective date of this provision, which was July 1, 2019. For transfers made before this date, an exemption from clawback (mochidashi menjo) would need to be established based on an explicit statement by the deceased or a clear implication of such intent under the legal rules applicable at that earlier time.

Implications for Estate Planning for Long-Married Couples

The introduction of Article 903(4) has several important implications for estate planning in Japan, especially for couples who have been married for 20 years or more:

  1. Enhanced Housing Security for Surviving Spouses: This is the most direct benefit. It provides greater assurance that a surviving spouse can retain the marital home without this significantly depleting their entitlement to other assets necessary for their ongoing living expenses.
  2. Simplified Expression of Intent (for Mochidashi Menjo): For gifts or bequests of residential property to a spouse of 20+ years, the deceased no longer needs to explicitly state that they wish for an exemption from clawback; this intention is now legally presumed.
  3. Requirement to Express Contrary Intent: Conversely, if a testator in a long-term marriage does want the value of the residential property given to their spouse to be clawed back and counted against their share of other assets, they must now clearly and explicitly state this contrary intention in their will or at the time of the gift to override the presumption.
  4. Continued Importance of Iryubun Planning: Estate planners and testators must remember that this presumption regarding mochidashi for inheritance share calculations does not shield the residential property from being included in the calculation base for Iryubun claims by other heirs. If the bulk of the estate consists of the home, and it is given to the spouse, other heirs like children might still have valid Iryubun claims (now for monetary compensation) against the spouse.
  5. Clarity in Will Drafting Remains Prudent: While Article 903(4) provides a helpful default, clear and unambiguous will drafting is always recommended. This is especially true if the testator's intentions are complex or if they wish to reinforce or deviate from the presumption in a specific way.

Conclusion

Article 903, Paragraph 4 of the Japanese Civil Code represents a thoughtful and significant development in inheritance law, tailored to the specific circumstances of long-married couples and their marital homes. It establishes a beneficial presumption that, by default, allows a surviving spouse of 20+ years to receive the residential property from the deceased without that property's value diminishing their share of the remaining estate assets for the purpose of inheritance share calculations. This reform aims to bolster the housing and financial security of surviving spouses, recognizing their long-term contributions and reflecting what is often the deceased's true intent. However, it is crucial for individuals and estate planners to understand that this presumption is rebuttable and, importantly, does not alter the fundamental rules regarding the calculation of legally secured portions (Iryubun) for other heirs. Careful and comprehensive estate planning therefore remains essential.