Legal Risks and Countermeasures of Impaired Judgment

-For Individuals and Business Owners-


Data shows that among those who are aged 65 or older, one out of seven has dementia. Now, according to government statistics, approximately 290,000 foreign nationals who are residing in Japan are aged 60 or over. Under such circumstances, we anticipate a growing demand for legal services for foreign nationals in preparation for latent decline of cognitive functions. Despite that, access to professional legal services is limited for foreign nationals living and / or doing business in Japan.
In this guide, we introduce comprehensive legal services we provide to people living and / or doing business in Japan regarding the following matters.

  • Legal risks that may arise if a person's ability to make decisions is impaired
  • Voluntary guardianship
  • Wills
  • Contract of mandate for postmortem affairs
  • Business succession

All of the information presented is for general discussion only. Please make an appointment or ask for individual consultation by calling or filling out the inquiry form.

Property Management Mandate Contract

Property Management Mandate Contract

A property management mandate contract is a contract in which the mandator delegates to the mandatory of the mandator's cash and deposits, real estate income, and various payments etc.

Usage Situations

➢When you want to entrust the management of your property to a trusted person when you are no longer confident in your health or judgment.
➢When you are worried that your property will be taken by those around you etc.
*In these situations, a property management mandate will be an option to protect your property by entrusting your passbooks, etc. to a trusted person (Mandatory).


However, since a property management mandate contract is essentially just an ordinary mandate contract, the bank may not allow the mandatory to withdraw the deposit at the bank counter.
Also, because a property management mandate contract can be concluded without a person supervising the mandatory, there could be a situation where the designee embezzles. Therefore, a mandator should consider selecting a truly trustworthy person as a mandatory or preparing a property management mandate contract with a third party to supervise the mandatory.
Therefore, it is a good idea to be aware of these considerations and decide whether to use a property management mandate contract.

Differences and Similarities between Property Management Mandate Contract and Voluntary Guardianship Contract

The major difference between a property management mandate contract and a voluntary guardianship contract is the point in time at which it is available (the point at which the effects take effect).
A voluntary guardianship contract is entered into while the person has the capacity to make decisions, but it becomes effective only when the person's capacity to make decisions declines (For more details, please refer to the following section.
On the other hand, a property management mandate contract is entered into while the person has the capacity to make decisions, and it becomes effective at the same time.
Despite these differences, the two are similar in that they involve entrusting the management of the person's property to a third party.
For this reason, in some cases a mandator designates the same person as the designee of a property management mandate contract and the voluntary guardian, and to establish a consistent support system by using a property management mandate contract while the mandator has judgmental capacity and using the voluntary guardianship contract when the person's judgment decrease.


As mentioned above, although a property management mandate contract is not a “panacea”, it is a meaningful measure in terms of protecting one's own assets.
If you are considering the use of a property management mandate contract, I will provide you with advice based on whether or not a property management mandate contract is appropriate for your situation.

Voluntary Guardianship

Voluntary Guardianship and its Advantages

Adult guardianship systems have been designed to protect individuals with impaired judgment. The two types of guardianship available in Japan are legal guardianship and voluntary guardianship.
Importantly, legal guardianship has the following drawbacks:
・It does not function as an advance preparation for future incapacity.
・You cannot appoint the guardian of your choice.
・You cannot determine the scope of the guardian's authority freely.
・Once it begins, you cannot end it.

In contrast, voluntary guardianship has the following advantages.
➢Optimal preventative measure.
・You can make a voluntary guardianship contract and prepare for future incapacity while you are in sound mind.
➢You can appoint the guardian of your choice.
・Based on the principle of freedom of contract, you can appoint your most trusted person to manage your property, the care and / or well-being.
➢You can determine the scope of the guardian's authority.
・Similarly, you can decide authority to entrust to the guardian and retain the remaining authority.
➢You can terminate the voluntary guardianship contract at any time before it becomes effective.
*After the commencement of the voluntary guardianship supervisor, it can be terminated with justifiable reasons.

Structure of Voluntary Guardianship

Voluntary guardianship is created by a contract called "voluntary guardianship contract" between a person and a prospective guardian. In order to prevent illegal conducts by evil guardians such as embezzlement of properties, supervision of voluntary guardians has been institutionalized. A voluntary guardian must report to the voluntary guardianship supervisor on the contents of the work when required, and the supervisor periodically submits reports of the supervision to the court, which is expected to ensure the sound performance of voluntary guardianship.

Process from Execution of a Voluntary Guardianship Agreement to Triggering of its Effect

An arrangement of voluntary guardianship begins with signing a voluntary guardianship contract before a notary public. However, because it is usually a provision for the future, the contract is dormant until its effect is triggered by decline of capacity. The following chart shows the process of a voluntary guardianship.


Voluntary guardianship is a secure and optimal preventative measure to adequately manage your assets during your lifetime after the capacity to make decisions decline. We see growing number of people taking advantage of it to reduce future burden on their families.
If you are interested, please contact us.



While the importance of preparing a will has been generally recognized, the significance of making it early is often overlooked.
In this section, after reiterating the importance of preparing a will, we take an example to introduce problems that may arise when a foreign national living in Japan prepares a will. Among several types of wills in Japan, we focus on "notarized will", which is considered least likely to be challenged later as to its validity.

Importance of Preparing a Will

If a foreign national residing in Japan deceases without a will, the inheritance of that person's assets will be governed by "the national law of the decedent".
Application of foreign inheritance laws to properties located in Japan is complicated, and depending on provisions of the "national law of the decedent", a proper completion of the inheritance / the execution of the will is required before the family can utilize the inherited property. This may put financial difficulties on the surviving family, who are already experiencing mental hardships and burden of carrying out the inheritance procedure without knowing who to take charge of. Also, a conflict between surviving family members will easily develop into an international dispute.
Possibilities of those unfortunate events can be considerably reduced by preparing a proper will.

Preparing Wills

A. Example consultation What should a foreign national living in Japan do to make a will in order to avoid the above problems? What are some points to keep in mind? Next, we discuss these points by examining a hypothetical consultation.

Hypothetical Inquiry

B. General advice to the hypothetical inquiry
・Have a New York attorney prepare a will in accordance with the laws of the State of New York, covering all of your assets.
・At the same time, have a Japanese attorney prepare a notarized will in accordance with the laws of Japan. It should be separate from the New York will, include the same contents as the New York will, and cover all properties located in Japan.
・Appoint an attorney as the executor of the Japanese notarized will.

When Should I Prepare a Will?

As you can guess, the answer is "while you are in good health", but what does that exactly mean?
In order to make a will, "capacity to make will" is required, which generally is considered the judgmental capacity of about 15 years of age. A risk is that if a person's judgmental capacity is impaired due to dementia or other reasons, the person may not be able to create a notarized will. Another risk is that, after a person's death with a will, an heir may dispute the validity of the will, claiming that the decedent had lost the capacity at the time of will creation.
To mitigate these risks, it is important to make a will while you are still in good health. Additionally in some cases, it is advised to undergo a check on cognitive function called "Hasegawa Method" before creating a will to certify "capacity to make will".
If you change your mind, it is possible to revoke an existing will and prepare a new one.


One should prepare a will while he has full capacity to make decisions. Its importance has been increasingly recognized, and the number of notarized wills in Japan has been on the rise in recent years as in the chart below.
Jurisdictions under which laws wills should be prepared differs case-by-case, taking into account location of estates and the "the national law" of the person. Failure in this assessment may result in the inability to execute a will even if you have prepared one. To avoid such a situation, it is strongly recommended that you consult with an attorney.

Contract of Mandate for Postmortem Affairs

What is “Contract of Mandate for Postmortem Affairs”?

In Japan, a notion of "Shukatsu/終活", or (preparatory) activities toward the end of life, has become a trend since around 2010, supposedly due to a rise of demand to reflect one's wishes in postmortem affairs (e.g., having a funeral in a manner the person desires). Although it sounds less familiar compared to wills, contract of mandate for postmortem affairs is a useful device that allows you to handle such affairs in line with your wishes.
Without a contract of mandate for postmortem affairs, surviving family and relatives are responsible for handling postmortem affairs of a deceased. To minimize such burden, the need is increasing to have a reliable person handle such affairs. Particularly in recent years, there is a growing awareness of the necessity to inform a specific person (such as an attorney) of passwords for cell phones, computers, etc., to deal with "digital belongings". A contract of mandate for postmortem affairs is the answer to these demands.

What Affairs may I Delegate?

The following are the examples of postmortem affairs a person may delegate to an attorney:
➢Payment of expenses incurred during life (e.g., hospital expenses)
➢Receipt of hospitalization deposits
➢Notice of death to authorities and relatives
➢Funeral and treatment of ashes
➢Pet care
➢Removal digital device password, data disposal

What is the Difference from a Will?

A will is a document that details the succession of inherited properties, and rights and obligations. On the other hand, a contract of mandate for postmortem affairs covers administrative work such as submitting a death certificate to the local government office. In other words, the former does not cover postmortem affairs, while the latter does not cover inheritance. To cover all material affairs after your death, it is critical to prepare both will and contract of mandate for postmortem affairs as a package.

Business Succession


Business owners and managers may be concerned about the impact of their impaired judgment to the business and / or the company. We discuss what to be considered in order to resolve such concerns, focusing on business succession.

What will Happen if a (Representative) Director of a Company becomes an Adult Ward?

Generally, if a (representative) director of a company is determined to be an adult ward or a "person under conservatorship" due to impaired judgment or other reasons, the person is required to resign as a director. If there are other directors, new (representative) director will be appointed from among those directors.
The problem arises when the director is the only director and is also the sole shareholder (100% owner) of the company. Similarly, the director must step down. A new director must be appointed by shareholders at a shareholders' meeting. The trouble is that because the (sole) shareholder lacks capacity to vote, there is no way to appoint a new director.
A possible solution is that the family of the former director-shareholder petition for an appointment of a legal guardian, and the appointed guardian exercises the voting rights to appoint a new director on behalf of the ward (former director-shareholder). However, it is highly doubtful whether the legal guardian has managerial knowledge to select a suitable successor as a director.
Without appropriate measures, management of a company will be exposed to serious risks. To mitigate such risks, owners and directors should be prepared for a business succession well ahead of time.

General Business Succession

A business succession is carried out on a case-by-case basis, but common issues are the following.
1. Selection and training of a successor
2. When and how to transfer shares to a potential successor
3. Whether to maintain control of the company (e.g., by issuing golden shares)
4. Whether to receive preferred dividends
5. Whether to sell the shares to a third party (M&A)
In regard to 2. "when", options are immediate transfer, transfer in calendar-year method, and transfer by inheritance in a will, etc.
In terms of 2. "How", sale, gift, and transfer as compensation are the choices. As taxation is a major issue in transfer of shares, a succession plan should be developed in cooperation with a tax accountant.
As to 3. and 4., the shares must be designed so that the wishes of the owner and directors are realized.
5. "M&A" is an alternative considered under situations like lack of successors. Since it requires calculations of corporate value (valuation), M&A also should be carried out with assistance of accountants and tax accountants.
We work in cooperation with English-speaking tax accountants to effectively plan and execute business successions. If you are interested, please contact us.


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