Japan's Statutory Reserved Portion (Iryūbun) Overhaul: How Does Monetization Change Heirs' Claims to an Estate?

Japanese Attorney at Law - Bengoshi L.L.

03 Jun 2025 • 8 min read

Japanese inheritance law, like that of many civil law jurisdictions, incorporates a vital concept known as iryūbun (遺留分), or the "statutory reserved portion." This legal principle guarantees certain close heirs a minimum share of the deceased's estate, regardless of contrary provisions in a will or the extent of lifetime gifts made by the deceased. Recently, Japan undertook a significant reform of its iryūbun system, fundamentally changing the nature of an heir's claim from a right to recover specific estate assets to a right to a monetary payment. This shift, effective for inheritances commencing on or after July 1, 2019, has profound implications for estate planning, business succession, and the resolution of inheritance disputes.

Understanding Iryūbun (Statutory Reserved Portion) in Japan

Before delving into the changes, it's crucial to understand the basics of iryūbun:

Entitled Heirs: The right to an iryūbun is granted to the deceased's spouse, children (and their lineal descendants, such as grandchildren, by representation), and lineal ascendants (such as parents or grandparents, if there are no children). Importantly, siblings of the deceased are not entitled to an iryūbun.
Purpose: The primary purpose of iryūbun is to provide a degree of financial security for close family members and to prevent them from being entirely disinherited or left with a nominal share due to the testator's unfettered disposition of assets through a will or substantial lifetime gifts. It balances the testator's freedom of testation with the protection of legitimate family expectations.
Calculation of the Iryūbun Share:
- The total iryūbun for all entitled heirs combined is generally one-half (1/2) of the value of the "estate base for iryūbun calculation." This fraction drops to one-third (1/3) if the only heirs with iryūbun rights are lineal ascendants (e.g., only the deceased's parents are alive).
- This total iryūbun amount is then distributed among the individual entitled heirs according to their respective statutory inheritance shares (法定相続分 - hōtei sōzoku bun). For example, if the spouse and two children are heirs, their statutory shares are 1/2 for the spouse and 1/4 for each child. Their individual iryūbun shares would be 1/2 of these statutory shares (i.e., spouse gets 1/4 of the iryūbun base, each child gets 1/8).
- The "estate base for iryūbun calculation" (遺留分を算定するための財産の価額 - iryūbun o santei suru tame no zaisan no kagaku) is determined by taking the value of assets owned by the deceased at the time of death, adding the value of certain lifetime gifts, and then subtracting all debts and obligations of the deceased (Civil Code Article 1043).
  - Gifts included:
    - Gifts made to non-heirs within one year prior to the commencement of inheritance (death).
    - Gifts made to heirs (that constitute "special benefits" - 特別受益, tokubetsu jueki, such as gifts for marriage or livelihood capital) within ten years prior to the commencement of inheritance (a change from the previous rule which had no specific time limit for heirs, as long as it was a special benefit).
    - Gifts made at any time (even before the 1 or 10-year periods) if both the donor (deceased) and the donee knew that the gift would infringe upon the iryūbun of other heirs (Civil Code Article 1044).

The Previous System: Iryūbun Gentai Seikyūken (Right to Claim Abatement)

Prior to the 2019 reforms, an heir whose iryūbun was infringed had a right known as iryūbun gentai seikyūken (遺留分減殺請求権).

Nature of the Right: This was a "formative right" (形成権 - keiseiken). When an iryūbun-entitled heir exercised this right against a beneficiary (a legatee under a will or a donee of a lifetime gift) whose acquisition infringed their iryūbun, the infringing gift or bequest was automatically reduced or nullified in rem (物権的効果 - bukken-teki kōka) to the extent necessary to satisfy the iryūbun claim.
Consequence of Exercise: The practical effect was that the iryūbun claimant would automatically acquire a direct property interest (e.g., a co-ownership share) in the specific asset(s) that had been the subject of the infringing gift or bequest. For example, if a piece of real estate was bequeathed entirely to one child, another child whose iryūbun was infringed could claim back a co-ownership percentage of that specific real estate.
Problems with the Old System: This "in-kind" recovery system, while intended to protect heirs, often led to significant practical difficulties:
- Fragmentation of Assets: It frequently resulted in unintended and often undesirable co-ownership of assets, particularly indivisible ones like real estate or shares in a family business.
- Hindrance to Business Succession: If a testator bequeathed a business or company shares to a chosen successor, iryūbun claims could force that successor to share ownership with other family members who might not be involved in or suitable for the business, thereby jeopardizing business continuity and control.
- Complex Subsequent Disputes: Co-ownership arising from iryūbun abatement often led to further legal disputes regarding the use, management, or eventual partition (sale or division) of the co-owned asset.
- Monetary Substitution (価額弁償 - Kagaku Benshō): The recipient of the infringing gift/bequest did have the option under former Civil Code Article 1041 to pay a monetary sum equivalent to the value of the iryūbun portion to avoid the physical return or co-ownership of the asset. However, the timing for valuing this monetary payment (whether at the time the iryūbun abatement was claimed, or at the time of actual payment/court judgment) was a source of legal contention, although a Supreme Court decision on August 30, 1976 (Minshu 30-7-768) generally favored valuation at the time of actual payment or judgment.

The Landmark Reform: Monetization of Iryūbun Claims (Civil Code Article 1046)

The most significant change introduced by the recent reforms (effective for inheritances commencing on or after July 1, 2019) is the monetization of iryūbun claims. The previous right to claim abatement (iryūbun gentai seikyūken) has been replaced by the "right to claim monetary payment for iryūbun infringement" (iryūbun shingai gaku seikyūken - 遺留分侵害額請求権) under the new Civil Code Article 1046, Paragraph 1.

The Core Change: An heir whose iryūbun has been infringed no longer claims a share of the specific gifted/bequeathed property itself. Instead, they now have a right to demand a monetary payment from the recipient(s) of the infringing dispositions, equivalent to the value of the iryūbun that was infringed.
Nature of the New Right: The right to make this claim is still considered a "formative right"—the entitled heir must actively assert it against the recipient(s). Upon the valid exercise of this right, a monetary obligation (a debt) arises on the part of the recipient to pay the calculated sum to the iryūbun claimant. The underlying gift or bequest itself is no longer partially "undone" in terms of property title.

Key Advantages and Implications of Monetization

This shift to a purely monetary claim carries several substantial benefits:

Preservation of Specific Assets with the Intended Recipient: This is arguably the most critical advantage. The original recipient of a gift or bequest—for example, a designated business successor who receives company shares, or an heir who receives a specific piece of real estate intended for their use—can now retain full ownership and control of that specific asset. They satisfy the iryūbun claim by making a cash payment to the entitled heir(s).
Facilitation of Business Succession: By preventing the forced co-ownership or potential forced sale of essential business assets (like company shares or operational real estate) to satisfy iryūbun claims, the monetization greatly aids smoother business succession planning. The successor can keep the business intact by compensating other heirs monetarily.
Simplification of Dispute Resolution: Monetary claims are generally more straightforward to quantify and resolve than disputes involving the co-ownership, management, and potential partition of physical assets. This can lead to quicker and less contentious settlements.
Clarity on Valuation Basis: The claim is for a specific sum of money. While the underlying assets that formed the basis of the iryūbun calculation still need to be valued (typically as of the time of the inheritance commencement) to determine the amount of infringement, the ultimate claim itself is a liquidated monetary sum, reducing ambiguity about what is owed.

Calculating the Monetary Claim Amount (Art. 1046, Para. 2)

The amount of the monetary claim for iryūbun infringement is calculated as follows (simplified):

Monetary Claim Amount = A - (B + C)

Where:

A = The iryūbun claimant's individual iryūbun amount (calculated as their iryūbun percentage of the total "estate base for iryūbun calculation").
B = The value of any testamentary gifts or special lifetime gifts already received by the iryūbun claimant from the deceased.
C = The value of the net assets the iryūbun claimant is entitled to receive from the deceased's actual remaining estate (i.e., after all gifts and bequests to others are considered) based on their calculated inheritance share (this often involves determining their "concrete inheritance share" - 具体的相続分, gutaiteki sōzoku bun, which factors in special benefits received by all heirs and contributions made by heirs to the estate, to achieve a fair baseline before applying the claimant's statutory proportion to this adjusted divisible estate).

Recipient's Obligation and Potential Relief: Grace Period for Payment (Art. 1047, Para. 5)

The recipient of the gift or bequest that infringed upon an iryūbun now becomes a debtor, obligated to pay the calculated monetary sum to the iryūbun claimant. Recognizing that the recipient might not have immediate liquid funds to satisfy this claim, especially if the asset they received is illiquid (like real estate or business shares), the law provides a safety valve:

Upon the request of the debtor (the recipient of the infringing disposition), the court can grant a reasonable grace period for the payment of all or part of the monetary sum owed. The court will consider the debtor's financial situation and ability to pay when deciding on the length and terms of any such extension. Interest, often at the statutory rate, may be ordered to accrue on the deferred amount during this grace period.

The shift to a monetary claim has necessitated consequential amendments and deletions of several former Civil Code articles that were premised on the in rem (property-based) effect of iryūbun abatement:

Former Article 1031 (the right to claim abatement itself) has been fundamentally replaced by the new provisions for monetary claims.
Former Article 1036 (which dealt with the return of fruits or income derived from property that had been abated) has been deleted, as there is no longer a direct recovery of the property itself.
Provisions regarding the abatement of disproportionately low-value onerous acts (former Art. 1039, now revised as Art. 1045, Para. 2) and the rules for situations where gifted property had already been transferred by the donee to a third party (former Art. 1040, now deleted) have been adjusted or removed to align with the new monetary framework. Since the claim is now a personal monetary claim against the original donee/legatee, the pursuit of the specific asset into the hands of a subsequent transferee is no longer the primary mechanism.
Previously, provisions stating that gifts or testamentary share designations infringing iryūbun were void only to the extent of the infringement have also been modified or removed, as the underlying dispositions themselves are no longer "voided" in part; rather, they stand, and the recipient simply incurs a monetary obligation.

Strategic Considerations

This reform has important strategic implications:

For Testators: While the fundamental protection of iryūbun remains, testators aiming to ensure specific assets (especially business assets or a particular property) pass intact to a chosen successor now have greater certainty that this can be achieved, provided the successor has or can raise the funds to satisfy potential monetary iryūbun claims. Estate planning should involve assessing potential iryūbun liabilities and considering how they might be funded (e.g., through life insurance payable to the successor, or ensuring sufficient liquid assets are available).
For Heirs/Beneficiaries: Recipients of significant gifts or bequests must be cognizant of their potential monetary liability to iryūbun claimants. Conversely, iryūbun claimants must understand that their entitlement is now a claim for money, not for a direct share in a specific contested asset.

Conclusion

The monetization of iryūbun claims represents a significant modernization of Japanese inheritance law. It shifts the focus from a potentially disruptive in-kind recovery of property to a more practical and financially oriented settlement. This change is particularly beneficial for preserving the integrity of family businesses and specific properties according to the testator's wishes, while still upholding the core principle of iryūbun – ensuring that legally protected heirs receive their minimum guaranteed share of the deceased's wealth. By converting the claim into a monetary one, the law aims to reduce complex co-ownership disputes and facilitate smoother, more predictable outcomes in the settlement of estates in Japan.