Tax-free education trusts rake in ¥420 billion despite weak inheritance role


Trust funds that let grandparents make tax-free contributions toward their grandchildren’s education are becoming more popular than expected since they debuted in April 2013.

Deposits in such trusts are likely to top ¥1 trillion by the end of 2015, when the tax exemptions expire, a top official at the Trust Companies Association in Japan said.

Up to ¥15 million in contributions toward education expenses were made tax-free as part of tax system reforms for fiscal 2013.

About 63,000 contracts for the educational trusts have so far been sold by the four major trust banks in Japan — far more than the initial projection of 54,000 by the end of fiscal 2015.

To date, some ¥420 billion has been deposited in the trusts.

Mitsubishi UFJ Trust and Banking Corp. is leading its rivals in sales, taking advantage of the nationwide branch network of its agent, Bank of Tokyo-Mitsubishi UFJ.

“Although the educational donation trusts had been expected to be used to reduce inheritance tax payments, many people set them up out of sincere feelings for their grandchildren,” a Mitsubishi UFJ Trust official said.

Mizuho Trust & Banking Co. has strengthened its lineup of inheritance-related products, including the educational trusts, in partnership with Mizuho Bank.

Resona Bank, the banking arm of Resona Holding Inc., began aggressively marketing such products as part of a joint push alongside affiliates Saitama Resona Bank and Kinki Osaka Bank.

Aiming to attract new customers, Sumitomo Mitsui Trust Bank has launched several incentives for those who purchase its educational trusts, including preferential treatment on fees for testamentary trusts, interest rates on time deposits and housing loan rates.

By February, SMTB had acquired some ¥19.2 billion in time deposits since launching the service.

Eager to step up sales ahead of the inheritance tax increase slated for January 2015, the trust banks want the government to make the temporary tax exemption permanent and raise the limit on tax-exempt deposits, industry sources said.