Who Pays? Understanding the Burden of Iryūbun (Statutory Reserved Portion) Infringement Claims in Japan

Japanese Attorney at Law - Bengoshi L.L.

• 8 min read

Japan's statutory reserved portion, known as iryūbun (遺留分), ensures that certain close family members receive a minimum share of a deceased person's estate, even if a will or lifetime gifts suggest otherwise. A significant recent reform, effective for inheritances commencing on or after July 1, 2019, transformed these iryūbun claims from a right to recover specific property into a right to demand a monetary payment equivalent to the infringement. This fundamental shift to monetization necessitates a clear understanding of who is responsible for making these payments when multiple parties have benefited from the deceased's dispositions.

The Fundamental Shift: Iryūbun as a Monetary Claim

It's crucial to reiterate that under the amended Civil Code (specifically Article 1046), an heir whose iryūbun rights have been infringed no longer reclaims a portion of the actual gifted or bequeathed property. Instead, upon exercising their "right to claim monetary payment for iryūbun infringement" (遺留分侵害額請求権 - iryūbun shingai gaku seikyūken), they acquire a monetary claim against the person(s) who received the property or benefit that caused the infringement. The core question then becomes: who is liable to pay this monetary sum, and in what order?

The Order of Burden: Who Pays First? (Civil Code Article 1047, Paragraph 1)

Article 1047, Paragraph 1 of the Civil Code meticulously sets out the hierarchy of who bears the financial responsibility for satisfying iryūbun infringement claims. The principle is to first look to those who benefited from the deceased's dispositions at or closest to the time of death, and then work backward to earlier lifetime gifts if necessary.

Step 1: Recipients of Testamentary Dispositions (Legatees and Similar Beneficiaries)
The primary burden falls upon those who received assets or benefits through the deceased's will. This category includes:

  • Legatees (受遺者 - juisha): Individuals or entities who received specific bequests (e.g., "I bequeath my shares in Company X to A") or comprehensive bequests (e.g., "I bequeath one-third of my estate to B").
  • Recipients under "Specific Property Succession Wills" (特定財産承継遺言 - tokutei zaisan shōkei igon): This refers to heirs who inherit specific assets directly through a will that uses phrasing like "I have [Heir C] inherit my real property located at..." (formerly known as "sōzoku saseru" wills). The amended law explicitly treats recipients under such wills similarly to legatees for the purpose of bearing iryūbun burdens.
  • Beneficiaries of Testamentary Designations of Inheritance Shares: If a will designates specific inheritance shares (指定相続分 - shitei sōzoku bun) that result in an iryūbun infringement for another heir, the heirs who benefit from these enhanced shares will also be primarily liable.

Step 2: Donees of Lifetime Gifts (受贈者 - juzōsha)
If the total value of assets received by legatees and other testamentary beneficiaries is insufficient to satisfy all iryūbun infringement claims, or if there were no such testamentary dispositions that caused an infringement, then recipients of certain lifetime gifts made by the deceased become liable. The iryūbun system looks back at gifts made:

  • To non-heirs within one year of death.
  • To heirs (as special benefits) within ten years of death.
  • At any time if both donor and donee knew the gift would harm iryūbun rights.

It's generally understood that gifts effective upon death (shinzōyo - 死因贈与) are treated similarly to testamentary bequests and would thus fall into the first category of burden-bearers, although this is not explicitly codified in Article 1047 with the same directness as testamentary bequests. Prevailing legal interpretation and prior case law (e.g., Tokyo High Court, March 8, 2000, Kōminshū 53-1-93, which treated them like testamentary gifts for abatement order ) support this ranking.

Apportioning the Burden Among Multiple Liable Parties

When multiple individuals fall into the same category of liability (e.g., multiple legatees, or multiple donees of gifts made at the same time), Article 1047 provides rules for apportioning the burden among them:

1. Multiple Legatees or Recipients of Testamentary Gifts (Art. 1047(1)(ii))

  • General Rule: Proportional Burden: If there are several legatees or beneficiaries under specific property succession wills, they bear the monetary burden of iryūbun infringement in proportion to the value of their respective testamentary gifts or bequests. The "value" for this apportionment is typically the value as of the commencement of inheritance.
  • Testator's Override: The testator has the power to specify a different order or method of burden among these testamentary beneficiaries in the will itself. For example, a testator might direct that a particular bequest should be used first to satisfy any iryūbun claims before other bequests are affected.
  • Adjustment for Recipient's Own Iryūbun: A significant refinement, codifying principles from a Supreme Court decision (February 26, 1998, Minshu 52-1-274), is that if a legatee or testamentary beneficiary is also an heir entitled to their own iryūbun, the amount of their personal iryūbun is notionally deducted from the value of the assets they received via the will before calculating their pro-rata share of the burden for another heir's iryūbun claim. This prevents their own protected share from being unfairly used to satisfy another's claim.

2. Multiple Donees of Lifetime Gifts (Art. 1047(1)(iii))
The rules for apportioning the burden among multiple donees depend on when the gifts were made:

  • Gifts Made at Different Times (LIFO Principle): Recipients of more recent (later) gifts are liable before recipients of earlier gifts. This "Last In, First Out" (LIFO) approach means that the iryūbun claimant must first seek recovery from the donee(s) of the most recent infringing gift(s). Only if that gift (or gifts) is insufficient to cover the infringement can the claimant proceed against the donee(s) of the next preceding gift, and so on. This is a mandatory rule and generally cannot be altered by the testator's subsequent will with respect to lifetime gifts already completed. This maintains the principle of former Civil Code Article 1035.
  • Gifts Made Simultaneously: If several lifetime gifts were made at the same time (e.g., on the same day without clear evidence of sequence), these donees bear the burden proportionally to the value of their respective gifts, similar to the rule for multiple legatees. A Great Court of Cassation judgment (September 15, 1934, Minshu 13-20-1792) established a presumption that gifts made on the same date are considered simultaneous unless there is evidence to the contrary (e.g., specific times recorded on transfer documents).

What if the Gifted/Bequeathed Asset Has Been Transferred to a Third Party?

A significant change resulting from the monetization of iryūbun claims concerns situations where the asset originally gifted or bequeathed has since been sold or transferred by the recipient to a third party.

  • The Old System (Former Civil Code Art. 1040): Under the previous in rem abatement system, if a donee had transferred the gifted property, the iryūbun claimant could generally only demand monetary compensation (kagaku benshō) from that donee. However, a critical exception existed: if the subsequent third-party transferee was aware at the time they acquired the property that doing so would harm the iryūbun claimant's rights (i.e., they were a "mala fide" transferee knowing of the potential iryūbun infringement), the claimant could pursue the actual property itself from that third party.
  • The New System (Deletion of Former Art. 1040): With the shift to an iryūbun claim being purely a right to a monetary payment from the original recipient (the legatee or donee), former Article 1040 has been deleted. This means:
    • The iryūbun claimant's primary recourse is a monetary claim against the initial legatee or donee who received the infringing disposition from the deceased.
    • Whether that original recipient still possesses the asset, or has sold it to someone else, does not change the nature or target of this primary monetary claim.
    • The good faith or bad faith of a subsequent purchaser or transferee of the asset from the original donee/legatee is no longer directly relevant to the iryūbun claimant's monetary demand against that original recipient. The original recipient owes the money based on the value of the infringement they caused, regardless of the asset's current whereabouts.

This change simplifies matters by focusing the liability on the direct beneficiary of the deceased's largesse, rather than potentially embroiling third-party acquirers in disputes over the physical asset (unless separate grounds, outside of iryūbun law, exist to challenge such a transfer).

The Risk of Insolvency of a Liable Party (Civil Code Art. 1047, Para. 4)

What happens if the person who is primarily liable for paying the iryūbun infringement amount is insolvent (無資力 - mushiryoku) and unable to pay?

  • Article 1047, Paragraph 4, clearly states that any loss arising from the insolvency of a legatee or donee who is liable to pay is to be borne by the iryūbun claimant.
  • The iryūbun claimant cannot then "skip over" this insolvent individual and demand that portion of the payment from someone who is next in the statutory order of burden (e.g., seeking it from an earlier donee if a later, primarily liable donee is bankrupt, or from a donee if a primarily liable legatee is bankrupt).
  • This rule upholds a principle from the former law (old Art. 1037), which was based on the rationale that individuals lower in the order of bearing the iryūbun burden (i.e., those whose gifts/bequests were less directly responsible for the infringement) should not be additionally burdened by the financial inability of those who were primarily responsible. The iryūbun claimant bears the credit risk of the person(s) who directly benefited from the infringing dispositions.

Court's Discretion: Granting a Grace Period for Payment (Art. 1047, Para. 5)

To mitigate potential hardship for a legatee or donee who is found liable for a monetary iryūbun payment but may not have immediate liquid funds (especially if the asset they received was illiquid, like real estate or shares in a private company), the law provides a relief mechanism:

  • The person liable to pay the monetary sum can request the court to grant a reasonable extension (grace period) for the payment of all or part of the debt. The court will consider the debtor's circumstances in deciding whether to grant such an extension and for how long. Interest may be stipulated for the period of deferral.

Practical Implications

These rules on the burden of iryūbun claims have several practical consequences:

  • Iryūbun Claimants: Must carefully identify all relevant recipients of gifts and bequests and understand the correct order in which to make their monetary claims. The risk of a primary debtor's insolvency means that full recovery of the infringement amount is not always guaranteed.
  • Recipients of Large Gifts/Bequests: Need to be aware of potential future monetary liability. For donees of lifetime gifts, the LIFO rule (later gifts burdened first) can be particularly impactful, making more recent recipients more vulnerable.
  • Estate Planners (Testators): When planning an estate, it's crucial to understand this order of burden. If a testator wishes to protect certain bequests more than others from being used to satisfy iryūbun claims, they can, to some extent, direct this within the category of testamentary dispositions. However, the LIFO rule for lifetime gifts is generally fixed. Strategic planning might involve ensuring sufficient liquid assets are available in the estate or with key beneficiaries to cover potential monetary iryūbun claims, thereby protecting specific non-liquid assets (like a family business) from needing to be sold to raise cash.

Conclusion

Japan's move to monetize iryūbun claims has brought with it a more clearly defined, albeit largely consistent with prior principles, system for allocating the burden of these monetary obligations. Legatees and beneficiaries of will-based transfers bear primary responsibility, followed by donees of lifetime gifts in reverse chronological order. While this provides greater certainty and helps preserve specific assets with their intended recipients, the iryūbun claimant now bears the direct financial risk of an obligated party's insolvency. The provision for court-approved payment extensions offers a practical measure of relief for those who may need time to meet their obligations. These rules underscore the importance of careful consideration of iryūbun implications in all stages of Japanese estate planning and administration.