More people are falling into "inheritance poverty," where inheriting the family home unexpectedly leads to financial strain. The reason is the buildup of unplanned expenses such as inheritance tax, the cost of maintaining a vacant house, and demolition expenses. This article explains the core knowledge and practical steps needed to avoid inheritance poverty.
Why can inheriting the family home lead to poverty?
In recent years, more families have found themselves "passing around" the issue of who will take over the family home. The biggest reason is the burden of inheritance tax. The larger the inherited assets, the greater the tax burden becomes, creating the reverse situation in which a person inherits property yet still faces financial hardship.
What costs arise when no one lives in the inherited family home?
If you do not live in the inherited family home, the following costs may arise.
- Higher inheritance tax: The "small residential land valuation reduction system" does not apply, which increases the assessed value of the land
- Maintenance and management costs: Fixed asset tax, repair costs, and management fees are required even if no one lives there
- Demolition costs: Costs can become even higher if asbestos is involved
What are three ways to deal with a family home you will not live in?
Sell it
If you want to avoid ongoing maintenance and management costs, selling is the best option. However, it may be difficult to find a buyer if land prices are low or the location is unfavorable.
Rent it out
If the location and building condition are good, rental income may be possible. This can also reduce the burden of ongoing costs.
Donate it
If neither selling nor renting is realistic, donating the property to a local government may be an option. However, it may not be accepted unless the land has practical value.
How much inheritance tax is due?
The basic inheritance tax exemption is calculated as "30 million yen + 6 million yen per statutory heir". Tax rates are progressive, ranging from 10 to 55 percent, so the greater the inherited assets, the heavier the tax burden.
Frequently Asked Questions (FAQ)
Q. Can I renounce an inheritance?
Yes. You can renounce the inheritance by completing the necessary procedure with the family court within three months from the day you became aware that the inheritance had begun. However, this means giving up all inherited assets.
Q. What happens if a vacant house is left unattended?
Deterioration in appearance and sanitation may lead to guidance or warnings from neighbors or local authorities. If the property is designated a "specified vacant house," the preferential fixed asset tax treatment may be removed, increasing the tax burden.
Q. Can renovation costs for an inherited family home be deducted from inheritance tax?
Renovation costs themselves are not deductible from inheritance tax. However, if you live in the family home, the "small residential land valuation reduction system" can reduce the assessed value of the land by up to 80 percent.
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