It is easier to get understanding of others such as employees but it is not always easy to find a right person within the family. Also, if the company is a major part of your estate, because the estate law guarantees that 50% of the default split should go to other heirs, the one to take over the business will likely not have 100% of the shares. For example, the default split for his spouse is 50%, and children 50% in total. If you have more than one child, say three children, each children will get 1/6 of your estate (50% * 1/3) by default. You can set a will to change the proportion but your spouse has right to take 1/4 (50% of 1/2) each children 1/12 (50% of 1/6) as minimum guaranteed.
But of course everybody know that it will be easier to run a company if you have bigger control by having more shares.
To solve this problem, there is a new law introduced recently called 承継円滑化法 or Smooth (Business) Succession Law.
By this law, you can choose two major benefits. (1) The first one is where you can exclude the valuation of the company from the computation of the minimum requirement. For example, if your estate in total is 300 million yen and the company valuation is 200 million yen, the minimum guaranteed estate will be based on 100 million (300mm – 200mm).
(2) The second option is you can fix the valuation of the company at the current situation. For example, the today’s valuation of the company is 50 million yen. By the time you pass away, your company valuation will be 500 million yen because your son worked so hard to grow the company bigger and healthier, your total estate is 600 million yen including the company. The minimum guaranteed estate will be based on 100 million yen (600mm – 500mm). This arrangement will not demotivate the person to take over the business and work harder.