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International Succession Laws

Edited by:
Nicola Saccardo and Piers Master, Charles Russell Speechlys LLP
Bloomsbury Professional
Publication Date:
April 2024

Trusts have not been commonly used in Japan for private financial planning and been used mainly for commercial purposes before the amendment of the Trusts Law in 2006. However, there has been an increasing need for the new trust structures made available as a result of this amendment. Under traditional Japanese Civil law, an individual can designate only the first beneficiary who inherits the estate after such an individual’s death by will, but cannot designate the second beneficiary after the first beneficiary’s death. However, a trust structure can make this possible and an individual (trustor) can designate several beneficiaries in several generations. Such trust continues until the death of the beneficiary who inherits the beneficiary right after 30 years from the foundation of such trust. Also, a trust structure for some types of asset can save inheritance tax by creating two types of beneficiary rights, namely a beneficiary right on principal that belongs to the inheritor, and a beneficiary right on profit that belongs to the trustor.

Furthermore, in a case where all or almost of the estates of a business person are shares of that person’s private company and he/she has many successors, that business person cannot give all of his/her shares to a certain successor that the business person believes to be competent in business under Japanese law. This is because each successor has an individual reserved portion to the estate. However, the business person can realize his/her intention by transferring his/her shares to a trust— the trustee of which is such specific successor to whom the business person desires to transfer the business and the beneficiaries of which include all successors. 

It is needless to say, that the methods for utilization of trusts are not limited to the above. More and more people will probably use trusts for their Japanese estate planning in the future.