How to split ownership on new house purchase

[toonsense]

We are both US Citizens and US tax residents. Married for over 20 years in the US. During this time, husband earned all the money from his job, but all money are in “joint” accounts because the American way of thinking about this money is that it is “joint” money earned while we were married. But my understanding is that the Japanese way of thinking about this money might be that it all belongs to the husband.

Now we are going to buy a vacation home in Japan, but still remaining US tax residents. Should we (a) register husband as 100% owner following Japanese thinking, or (b) register husband and wife as 50% owner each, following American thinking.

We might become Japanese tax citizens 5 to 10 years from now, so it might be prudent to split assets now to avoid a large tax bill if husband dies first and passes all assets to wife. (Our total assets exceeds the 160 million yen spousal deduction, and we have no kids or other heirs.) on the other hand, we don’t want to pay a gift tax now if the Japanese tax agency considers that 50% ownership in option b as a gift.

Thanks as always for your knowledgeable advice!

 

[rogueebear]

@toonsense

on the other hand, we don’t want to pay a gift tax now if the Japanese tax agency considers that 50% ownership in option b as a gift.

If you’re not a tax resident of Japan, then you wouldn’t owe any gift tax to Japan now. Unless you’re a Japanese citizen who only lost Japanese tax residency less than 10 years ago.

 

[regina1961]

@toonsense We are almost done buying a place in Tokyo right now and there was no mention at all about who was earning how much income. Did anyone actually point out B was a worry?

 

[toonsense]

@regina1961 Nobody explicitly saying gift tax was a concern. Mostly just our imagination. Although realtor recommended 100% ownership by husband, but maybe he is just old school.

 

[fritzwoodruff]

@toonsense It depends on the value of the property. Something that costs ¥50 million or more in a location where property values are increasing or holding steady may end up costing you inheritance taxes in the future, if you start at 100/0 ownership. In the other hand, if you are buying a cheap house in the country, setting the ownership ratio at 50/50 just increases the paperwork needed to register and later resell the property.

 

[miketexas]

@fritzwoodruff It was explained to me that setting the ownership to 50/50 without each person actually paying 50% the house is considered gifting. And any amount over 110 man (in case not receiving any other gift) will trigger gift tax.

 

[fritzwoodruff]

@miketexas I cannot give you specific advice without asking for a lot of detailed private information but currently you are not tax residents of Japan so you would not owe gift taxes yet.

Also, if your money is currently in a joint account, you could create a separate account for each spouse now and divide up any money you plan to spend together in Japan in the future. If you later become tax citizens and send that money over to Japan to purchase something, you will be sending the money from separate accounts and no gift tax will be triggered.