retirement planning

Use of procedures in Japan known as a family trust for inheritance and dementia which can be used also by foreign nationals

It is said that one in five people in Japan, which has become a super-aging society, will have dementia.  

A person with dementia may become unable to manage their own assets, and, in the worst-case scenario, the assets may be frozen. This would make it extremely difficult for the person with dementia to pay for living expenses and the like.

Are you taking any steps for coping strategies in case you or your family members have dementia? 

This article explains a trust structure in Japan that can be used as coping strategies for both dementia and inheritance. 

What is a family trust?

A family trust is a structure to which you entrust your assets to a trust which is administered by  someone you can trust, such as a family member. This trusted family member manages the assets and administers the trust. It is also called a family trust because the person who manages the property is usually a trusted family member. If a family trust is used effectively, it can manage assets in the event of dementia and can also be used as an alternative to a will, effectively simplifying the inheritance process.

What happens if steps to prevent dementia are not taken?

If a person’s judgment is impaired due to illness, dementia and the like, even family members will not be able to freely move the assets of the person with dementia, etc. In such a situation, if no steps are taken to address the management of assets and other similar issues, the use of Japan’s adult guardianship will become inevitable.

This means that the family court will appoint an adult guardian at the request of a family member, etc. and the appointed guardian will manage the assets on behalf of the person with dementia or other illness, under the supervision of the family court. 

Unlike many foreign countries where family members or another person close to the person with dementia or other illness are routinely appointed as guardians, this is rarely the case in Japan. Rather, shihosho-shi lawyers and lawyers are more likely to be appointed. We understand that foreign nationals are likely to be highly resistant to having a stranger appointed by the court to start managing their own assets or those of a family member with dementia or other illness. 

Since there is only a handful among these professionals in Japan who are fluent in foreign languages, it is quite possible that a guardian who is not capable of communicating with the person with dementia (or other illness) and/or such person’s family members. Since the guardianship system has many barriers even for Japanese, foreign nationals will naturally find it even more difficult to navigate the guardianship system.  

Coping Strategies for Dementia with a Family Trust

If you do not take steps to prevent the onset of dementia, you will have no choice but to use Japan’s adult guardianship system when your ability to make decisions becomes impaired.

However, if a family trust agreement is entered into with a trusted family member before your ability to make decisions becomes impaired, the family member who becomes the trustee will manage your assets even after your judgment becomes impaired, such as dementia. As a result, it may not be necessary to use the guardianship system. 

In addition, a family trust and adult guardianship can be used together. In that case, it is possible to avoid having strangers becoming involved in the management of your assets by using a voluntary guardianship. This essentially involves entering into a contract in advance in which the guardian is appointed. 

Further, if you have a contract pursuant to which the trust automatically terminates upon the death, the trust assets can be transferred to the new owner determined in advance by the trust. This allows the transfer of assets in a manner that avoids troublesome inheritance procedures. 

Although the use of family trusts alone is not a solution for everything, it can be a very powerful tool for dementia and inheritance for both Japanese and foreign nationals. 

A family trust is a customized contract whose details are set forth in accordance with the actual situation of the family and the wishes of the person who suffers from dementia or other illnesses. We strongly recommend that you consult with a shihoshoshi lawyer or a lawyer, who has experience creating and handling family trusts. 

Kobe Legal Partners also actively handles family trusts. For consultation on family trusts, please contact Kobe Legal Partners.

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