[고령화에 늘어나는 ‘老老상속’]
Japan prepares an alternative to the side effects of elderly inheritance
Extension of tax exemption for gifts such as grandchildren’s education expenses
U.S., tax exemption for gift and inheritance up to 19 billion won
Japan, where the side effects of ‘elderly inheritance’ emerged as a social problem ahead of Korea, has been implementing a ‘wealth rejuvenation’ policy for the past two years. The system was modified to allow for faster advance gifting so that the assets of the elderly can be transferred to the younger generation. The United States does not impose taxes on close to 19 billion won, including gifts and inheritances, while the United Kingdom imposes taxes only on money earned from the disposal of property gifted from family.
In Japan, elderly inheritance has emerged as a social topic over 20 years ago. Among all heirs (deceased people), the proportion of people over 80 years old had already reached 46.5% in 1998. In 2018, it rose to 71.1%. In Korea, last year, 53.7% of the deceased were over 80 years old. As the wealth of the elderly was locked up in the form of deposits without being able to be consumed or reinvested, Japan expanded the gift system during life in 2013. The gift tax reduction encouraged rapid transfer of wealth.
However, as the issue of inheritance between old and young people continued, a ‘wealth rejuvenation’ policy was implemented from 2022. In order to transfer assets concentrated in the elderly to the younger generation, various tax systems have been overhauled to ensure that prior gifts can be made smoothly. In particular, the time of gift subject to inheritance tax was increased from 3 to 7 years to allow for quicker prior gifting. In Japan, if parents gift something to their children, they are exempt from gift tax up to 1.1 million yen (about 10 million won) per year. However, if the gift was made within 3 years from the date of the parent’s death, an additional inheritance tax was imposed later. Under the wealth rejuvenation policy, additional inheritance tax must be paid within 7 years until 2031.
When a parent over the age of 60 makes a gift to a child or grandchild over the age of 18, the grandchild’s education expenses (15 million yen) and marriage and childcare expenses (10 million yen) are also exempt from gift tax. This system was originally scheduled to end in March of last year, but was extended for another three years.
The United States and the United Kingdom also encourage intergenerational asset transfers. The United States has greatly expanded the integrated inheritance and gift tax deduction since January 2018. The exemption of up to $5.5 million (approximately 7.6 billion won) per person, including gifts and inheritances, was increased to $11 million (approximately 15 billion won), and is currently exempt up to $13.61 million (approximately 19 billion won). In addition, if the money saved in advance for the education expenses of children or grandchildren is actually used for that purpose, there is also a system in place that exempts the profits from the operation from tax. In the UK, no gift tax is payable when gifting to a family member. Instead, if profits are generated in the process of disposing of the gifted assets later, capital gains tax is paid accordingly. However, if the person making the gift dies within 7 years of making the gift, inheritance tax may be payable.
Sejong = Reporter Soon-gu Jeong [email protected]
Sejong = Reporter Kim Do-hyung [email protected]
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