Miho Nakayama’s Son Renounces Estate as Japan Tax Bites

Japan's inheritance tax can turn even a large estate into a financial burden, especially when wealth is tied up in property. The reported case of late actress Miho Nakayama has renewed attention on how Japan's system can leave heirs facing steep tax bills, tight deadlines and limited room to maneuver.

Inheriting property is one thing. Paying the tax bill is another. In Japan, that gap has become a recurring problem for heirs whose inheritance consists mainly of real estate rather than cash.

In December 2024, Japanese actress Miho Nakayama died suddenly at the age of 54. Japanese media reported that, after more than four decades in the entertainment industry, she left behind an estate estimated at around 2 billion yen, made up largely of real estate and royalty income.

Her eldest son, Toto Tsuji, who lives in Paris, reportedly chose to formally renounce the inheritance through the court. Some lawyers and media commentators have suggested that both family circumstances and financial considerations may have played a role, though his actual reasons have not been confirmed publicly.

At first glance, the decision may appear surprising. But the central issue is not whether an heir wants the estate. It is whether the heir can afford to keep it.

When an estate is made up mainly of illiquid assets such as property or intellectual property rights, an heir may still need to raise a large amount of cash within a short period to pay inheritance tax. In practice, that can be extremely difficult. A rushed sale often means accepting a steep discount, leaving far less value in hand than the estate's headline figure suggests.

This is one of the structural problems built into Japan's real estate inheritance system. The property remains on paper, but the tax must be paid in cash. When the deadline arrives, heirs may be left with only two realistic options: sell quickly or walk away.

A large share of inherited wealth in Japan takes the form of real estate. For heirs, inheriting property is far more complicated than inheriting cash for three main reasons.

The first is the mismatch between paper value and available cash. Inheritance tax on real estate is calculated using official assessed values, including roadside land valuations or fixed-asset tax assessments, which are generally around 70 to 80% of market value.

That may initially sound favorable, because a lower assessed value reduces the taxable base. But the problem is that tax must still be paid in cash, not in property. If the asset cannot be sold quickly, or cannot be sold at a sufficient price, the heir must cover the shortfall.

The second problem is timing. Under Japanese law, inheritance tax must in principle be paid in full, in cash, within 10 months from the date the heir becomes aware of the inheritance.
For estates concentrated in real property, that timetable is often unrealistic. In Japan, an ordinary property sale typically takes three to six months from the decision to sell to the final transfer of title. If the estate includes multiple properties, homes in remote areas, occupied rental units or disputed assets, liquidation within the statutory deadline may become all but impossible.

The third problem is that the deadline can force distressed sales. To secure enough cash in time, heirs may have to sell at a discount. If the proceeds are still insufficient to cover the tax bill, they may be forced to sell additional assets, creating a downward spiral. Sell too quickly and the price falls. Wait too long and preferential tax treatment may be lost, increasing the burden further.

Japanese law does provide relief mechanisms, but the conditions are demanding.

One option is installment payment, known as ennō. Heirs who genuinely cannot pay in full may apply to pay over time. For estates with a high proportion of real property, repayment can in some cases be extended for up to 20 years. But applicants must prove they cannot pay the full amount at once, provide collateral and pay interest. Indicative annual rates are around 1.2% to 6.6%, though actual rates are set each year by Japan's National Tax Agency.

Another option is payment in kind, or butsuno, which allows heirs to transfer real estate directly to the tax authority instead of paying entirely in cash, but only when installment payment is still insufficient.

That may sound practical, but it comes with a significant disadvantage. When the National Tax Agency accepts property under this system, it uses the inheritance tax assessed value rather than the market price. In other words, the tax credit granted may be substantially lower than what the property could theoretically fetch in a private sale.

For example, if a parcel of land has a market value of 100 million yen but an assessed inheritance value of 50 million yen, transferring that property would offset only 50 million yen in tax liability. In some cases, if special exemptions also apply, the assessed figure may be reduced further, widening the gap between market value and tax relief. In practice, payment in kind is usually less efficient than an ordinary market sale.

* Figures are for reference only. Please refer to official government publications for authoritative data.

Japan's inheritance tax is among the highest in the world. The top marginal rate reaches 55% for taxable inherited amounts exceeding 600 million yen.

That high rate is one reason inheritance planning is especially important for families holding substantial real estate assets in Japan.

Japan does offer one major tax break aimed specifically at inherited real estate: the Small-Scale Residential Land Special Exemption.

This provision was designed to prevent heirs from being forced to sell a primary residence or business property simply to pay inheritance tax. If the conditions are met, the assessed value of inherited land can be sharply reduced depending on its use and size.

For primary residential land, up to 330 square meters may qualify for an 80% reduction. For ordinary business-use land, up to 400 square meters may also receive an 80% reduction. Rental residential land may qualify for a 50% reduction on up to 200 square meters.

The impact can be substantial. If a parcel of land has an assessed value of 100 million yen, an 80% reduction would cut the taxable base to 20 million yen, potentially reducing inheritance tax by several million yen or more.

But there is an important limitation. A key test is whether the heir was living with the deceased at the time of death. A surviving spouse qualifies automatically. A co-resident child may also qualify. A child living separately, however, must satisfy the strict requirements of the so-called “no-home” rule, which generally applies only when the heir does not own a residence.

In Nakayama's case, some tax specialists noted that because Tsuji reportedly lives in Paris and has an overseas residence, he was unlikely to qualify under that rule. If that assessment is correct, the exemption would not have been available, significantly increasing the potential tax burden.

For Taiwanese nationals who own real estate in Japan, cross-border inheritance can be even more complicated.

Japan's inheritance tax jurisdiction is determined largely by the deceased person's place of residence. If a foreign national living in Japan dies, Japanese inheritance tax still applies to real estate located in Japan.

For Taiwanese heirs who are not residents of Japan, the challenge of illiquid assets is compounded by language barriers, cross-border paperwork and prolonged communication with tax authorities. These factors can make it even harder to apply for installment payment or payment in kind within the required timeframe.

Another major issue is the risk of double taxation. Taiwan and Japan do not currently have a bilateral inheritance tax treaty. In principle, that means the same assets could be exposed to inheritance tax obligations in both jurisdictions, depending on the circumstances. In practice, this must be assessed case by case with professional advice.

From a tax planning perspective, many inheritance problems involving real estate arise because no preparations were made in advance.

One of the most important steps is confirming early whether heirs will qualify for the Small-Scale Residential Land Special Exemption. That means checking whether children live with the owner or whether they could meet the “no-home” rule if living separately. In some cases, living arrangements may need to be adjusted well before inheritance occurs.

Another strategy is to transfer property gradually through lifetime gifts. Japan allows annual gifts of up to 1.1 million yen without gift tax, which can be used over time to reduce the size of the taxable estate. But early planning is essential. Japan has adopted a seven-year look-back rule, to be fully effective from 2031, under which gifts made within seven years before death are added back into the taxable estate. As of 2026, transitional arrangements are still in place.

Cash preparation is also important. For Taiwan-based owners, buying life insurance directly in Japan is generally not practical. A more realistic approach is to build up cash reserves in a Japanese bank account during the ownership period, with the goal of covering estimated inheritance tax in the future. If the owner has substantial life insurance in Taiwan, heirs may use the payout to remit funds to Japan, but the transfer must still be completed within the 10-month deadline.

In addition, Taiwanese heirs who are not residents of Japan are required under Japanese law to appoint a tax representative in Japan to handle filings and payments on their behalf. This role is typically filled by a Japanese tax accountant or lawyer familiar with cross-border inheritance. It is often advisable to make such arrangements when purchasing property rather than waiting until inheritance occurs.

A notarized will can also help. By specifying which heir will receive each property and setting out how intellectual property or other non-physical assets should be handled, a formal will can reduce uncertainty and prevent unintended outcomes. Without one, distribution follows statutory inheritance rules.

Ultimately, installment payment and payment in kind should be treated as last-resort measures rather than primary strategies. Real estate may be an asset, but without careful planning it can also become a tax burden.

For anyone investing in Japanese property, inheritance planning should not be treated as an afterthought. It is a central part of long-term asset management.

**This article is based on publicly available reporting and Japanese tax regulations. Circumstances vary by individual case. Readers are advised to consult a qualified Japanese tax accountant (税理士) or attorney for advice specific to their situation.

Original Article in Chinese

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