The Spousal Residence Right: Separating a Home's Security from the Next Succession

"I understand the argument that the surviving spouse should not take too much of the estate. But that house is where I live. If everything goes to the children, where am I supposed to live?" We hear this question consistently when we walk families through a design that reads the first and second successions together.

It is not an emotional objection. It is a structural one — and the Civil Code addresses it directly.

Why It Looks Like a Binary Choice

Article 19-2(1) of the Inheritance Tax Act reduces the tax burden on property acquired by a surviving spouse. Item (ii)(a) of that paragraph uses, as its benchmark, the aggregate taxable value multiplied by the spouse's statutory share under Article 900 of the Civil Code — or ¥160 million, whichever is greater. The practical effect is that no inheritance tax is payable by the spouse on property up to the greater of the statutory share equivalent and ¥160 million.

Viewed through the first succession alone, leaving more to the spouse is cheaper — up to the point where the reduction is exhausted. The reduction is the lesser of (a) and (b) under Article 19-2(1)(ii), so once the spouse's share reaches (a) — the greater of the statutory share and ¥160 million — allocating still more to the spouse does not keep reducing the first-succession burden. And whatever the spouse acquires becomes taxable again on the spouse's own death. Concentrate the family home in the spouse's name and the housing is secure — but the property is carried into the second succession. Transfer ownership to the children instead and the carry-forward disappears — but the spouse now lives in a building owned by someone else.

The Civil Code's Answer: Split the Property Into Two Layers

Article 1028(1) of the Civil Code provides that a spouse who was residing, at the time succession commenced, in a building belonging to the decedent's estate acquires a right to use and take profits from the entire building free of charge — the haigūsha kyojūken, or spousal residence right. Ownership passes to someone other than the spouse — in most designs, a child or other heir; the right to live there stays with the spouse. One property, allocated across two layers.

The right does not, however, arise automatically. The same paragraph specifies only two routes: where the right is allocated to the spouse through division of the estate (item (i)), or where it is the subject of a bequest (item (ii)). Article 1029 adds that a family court may award the right in an estate-division adjudication only where the co-heirs have agreed to it, or where the court finds it particularly necessary to sustain the spouse's living. A will, a division agreement, or — where the heirs cannot agree — the spouse's own application to the family court: whichever the route, the right exists only because someone acted deliberately to create it.

Know the Conditions and the Limits First

The proviso to Article 1028(1) deserves particular attention: if the decedent co-owned the building with anyone other than the spouse at the time succession commenced, the spousal residence right cannot be acquired at all. Fractional interests left unconsolidated by an earlier succession, or a title shared with relatives, cannot be repaired once the death has occurred. How the family home is currently titled is a question to settle in advance.

Note also that the short-term spousal residence right, despite the similar name, is a separate mechanism protecting occupancy in the period immediately after death. It is not a planning instrument for the second succession.

The Tax Position: Not "Less Now," but "Not Carried Forward"

This is where the structure is most often misread. It is not accurate to say that establishing a spousal residence right reduces the burden of the first succession.

Article 23-2(1) of the Inheritance Tax Act sets out how the residence right is valued, and Article 23-2(2) provides that the building's value is the market value it would have had if no residence right were established, less the value of the residence right. The land follows the same pattern: paragraph (3) values the right to use the land under the residence right, and paragraph (4) values the land itself as the remainder. In the first succession, in other words, the value of the building and its land is allocated between the occupancy layer and the ownership layer — the total does not shrink. The residence right itself is valued by reference to the building's useful life, years elapsed since construction, the right's duration, and a compound present-value factor based on the statutory interest rate (Art. 23-2(1)(ii) and (iii)).

The effect appears at the next succession. Article 1036 of the Civil Code applies Article 597(3) — "a loan for use terminates upon the death of the borrower" — to the spousal residence right. On the spouse's death the right terminates and is extinguished. A right that has been extinguished is not passed on as estate property in the next succession, and ownership already sits, as of the first succession, with someone other than the spouse. The family home therefore falls outside the second estate by construction. This holds where the decedent owned the whole building. Where the decedent and the spouse co-owned it, Article 23-2(1)(i) of the Inheritance Tax Act values the portion corresponding to the decedent's share, and the spouse's own pre-existing share simply remains the spouse's property — and does fall into the second estate. The same applies where the division of the estate also gives the spouse a co-ownership share of the building: that share is the spouse's property and falls into the second estate. Note too that under Article 1028(3) of the Civil Code, even where the building becomes the spouse's property, the residence right is not extinguished so long as another person holds a co-ownership share.

This is not a device that generates a saving in the first succession. It is a device that keeps an asset from being carried into the second — and the difference between those two readings is the difference between a design that works and one that does not.

What to Confirm Before Proceeding

• How is the home currently titled? If the decedent co-owned the building with anyone other than the spouse at the time succession commenced, the proviso to Article 1028(1) rules the residence right out. Co-ownership between the decedent and the spouse alone is not caught by the proviso.
• Is there a route to acquisition? A bequest under a will, or a division agreement. Where the heirs cannot agree, a family court adjudication remains possible, but only where the conditions in Article 1029 are met. Absent any of these routes, the right does not arise of its own accord.
• How should the duration be set? Lifetime is the default, but an agreement, will, or adjudication may specify otherwise.
• What is the relationship with the heir taking ownership? Someone has to occupy the position of owning a building the surviving spouse continues to live in.

Housing security and tax burden are routinely presented as a choice between two goods. With the statutory mechanism in view, it stops being a choice and becomes a matter of design. Mapping the title to the home, the family structure, and the path through to the next succession onto a single diagram is where that work begins.

This article provides general information on tax systems and does not constitute individual tax consultation. Specific filings and tax computations are handled by licensed partner tax accountants whom we introduce.