Table Speech

Learning from the Young Today
※Mr. Tatsuyoshi Takashima's speech doesnot appear.

March 27, 2013

Mr. Tatsuyoshi Takashima
Chairman, DENTSU INC.

Inheritance and Trusts

March 27, 2013

Mr. Atsushi Takahashi
Senior Advisor, Sumitomo Mitsui Trust Bank, Limited

 The issue of “inheritance” is among the much-talked-about topics in the aging society. I will speak on “inheritance” today, in the context of portfolio management system “trusts.”
1. Merits of the will
 As the Japanese population ages, troubles over inheritance keep increasing. The number of “cases in dividing inherited property” revealed by the family courts shows a 20% increase in 10 years (from 9,004 cases in 2001 to 10,793 cases in 2011).
 We can avoid such troubles by making a written “will.” Its merits are:
 Avoid disputes among inheritors over inherited property, especially when inheritors have to consult over its apportionment.
 Clarify the “thoughts” of the decedent and apportion one’s asset as one intends, taking into account various factors including how close the inheritors were or who will succeed the business etc.

2. Testamentary trust
 A “will” must meet all legal conditions to be valid, thus we need to have extensive knowledge on civil law, tax, real estate and asset management, while paying due attention to ‘legally-secured portion’ or its wording. This is why an increasing number of people opt for “testamentary trusts” that prepare the will as well as administer and manage the entrusted assets. According to the Trust Companies Association of Japan, the number of such cases has increased dramatically 2.635 times (from 26,628 cases in 2001 to 70,155 cases in 2011).

3. Tax revisions during fiscal year 2013
 Tightening the inheritance tax
 According to the 2013 Tax Reform Outline, “basic exemptions” of the inheritance tax will be reduced to 60% of the current level, as of January 1st, 2015. For example, if there are 3 inheritors (a spouse and two children), the basic exemption amounts to 80 million yen under the current system. Under the new system, however, it will be reduced to 48 million yen.

 According to the National Tax Agency statistics, there were about 50,000 inheritance tax payments made (or 4% of the annual fatalities) in 2010. This figure will increase to 75,000 cases (or 6% of the fatalities) under the new system. 910,000 households (or 4% of the total) are estimated to be subject to inheritance taxation currently, which will increase to 1,360,000 households (or 6% of the total).

 Gift tax exemption for education funds
 A new scheme of “tax exemption for lump-sum gift of education funds” from grandparents to their grandchildren is scheduled to be applied from April 1st. The funds, up to 15 million yen per grandchild, must be placed in trusts etc. with a financial institution by grandparents.

4. Aging society and trusts
 Under this new scheme, grandparents’ assets will be handed down to their grandchildren channeled through financial institutions. “Trust” is a system where the “thoughts” of the trustor as well as the management and administration of the assets are entrusted to the trustee.

 Our economy and social structure must be based not on growth and development but on sustainability. We must think not only about ourselves but also about the benefit of the world as a whole. Thus we have to share with future generations. I am convinced that the unique functions of trusts will have an even greater role in solving various social issues including those of the aging society.