What Is Property Division? (Civil Code Article 768)
Property division is the process of distributing assets that were jointly accumulated during marriage when a couple divorces. Civil Code Article 768 grants either party the right to claim property division from the other.
There are three legal types of property division:
| Type | Description |
|---|---|
| Liquidation-type | Dividing assets jointly accumulated during marriage (most common) |
| Support-type | Economic support for a spouse who will face financial hardship after divorce |
| Compensatory-type | Payment by the spouse who caused the breakdown of the marriage |
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Covered Assets: What Is and Is Not Included
| Asset Type | Included (Marital Property) | Excluded (Separate Property) |
|---|---|---|
| Bank deposits | Savings accumulated during marriage | Pre-marriage balances, inherited or gifted funds |
| Real estate | Property purchased during marriage | Property owned before marriage, inherited property |
| Securities / funds | Stocks and funds purchased during marriage | Holdings from before marriage |
| Retirement pay | Portion corresponding to the marriage period | Portion earned before marriage |
| Life insurance | Cash surrender value accumulated during marriage | Pre-marriage accumulation |
| Vehicles | Cars purchased during marriage | Vehicles owned before marriage |
| Debts | Debts incurred for living or housing expenses | Pre-marriage personal debts, gambling debts |
| Pension | Employees' pension for the marriage period (via separate pension splitting procedure) | National pension (not subject to pension splitting) |
Key point: Even if an asset is in one spouse's name only, it is treated as marital property if it was substantively formed through joint efforts during the marriage.
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Try for free →The 50/50 Rule and Its Exceptions
General Principle: Equal Split
In practice, marital assets are divided equally (50/50) based on the principle of equal contribution.
Homemakers also receive 50%: Even if one spouse had no income, their contribution through housework, childcare, and caregiving is recognized as a contribution to asset formation.
Exceptions to the 50/50 Rule
- Assets formed through exceptional personal talent: In rare cases (e.g., professional athletes, renowned artists), courts have allowed a higher share for the spouse whose exceptional talent drove extraordinary wealth accumulation. However, this exception has a very high bar — general high income alone does not qualify.
- Very short marriages: When the marriage period was brief and most assets overlap with separate property.
- Dissipation or hidden assets: If a spouse recklessly disposed of assets, those amounts may be factored back into the calculation.
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Real Estate Valuation Methods
The value of real estate can vary significantly depending on the valuation method. Agreeing on the method in advance is critical.
| Method | Description | Notes |
|---|---|---|
| Market value | Appraisal by real estate agent or auction standard | Most realistic; varies by appraiser |
| Certified appraisal | Formal valuation by a licensed real estate appraiser | Most accurate; costs approx. ¥300,000–500,000 |
| Fixed asset tax value | Municipal value used for property tax | Easy to obtain; typically 60–70% of market value |
| Road price (inheritance tax value) | Published by National Tax Agency | Approx. 80% of market value; used for inheritance tax |
In practice, market value (real estate agent appraisal) is most commonly used. For high-value properties or disputed valuations, a formal appraisal is recommended.
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Retirement Pay Calculation Formula
Retirement pay — including future expected amounts — is subject to property division, but only the portion corresponding to the marriage period.
Formula:
> Retirement pay (estimated) × (Years married ÷ Years of service) × 1/2
Example: - Estimated retirement pay: ¥30,000,000 - Years of service: 30, of which years married: 20
> ¥30,000,000 × (20 ÷ 30) × 1/2 = ¥10,000,000
In this case, ¥10,000,000 of the retirement pay is subject to division.
Notes: - Future retirement pay may be discounted to reflect the risk of company bankruptcy or non-payment. - Already-received retirement pay that remains in a bank account is treated as ordinary savings.
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Three Scenarios for Property with an Outstanding Mortgage
Scenario 1: Sell and Settle
Sell the property and split the net proceeds (sale price minus remaining loan balance) equally.
- Benefit: Clean break with no future risk.
- Caution: Requires agreement on timing and price. If the property is underwater (sale price is less than the mortgage balance), the couple must negotiate how to share the remaining debt.
Scenario 2: One Spouse Keeps the Property and the Mortgage
One spouse stays in the home and takes over the mortgage.
- Caution: Requires the lender's consent for a name change. If the staying spouse is not the registered borrower, the lender may demand immediate full repayment. The staying spouse must pay the other spouse a compensatory payment equal to approximately half the property's equity value.
Scenario 3: One Spouse Stays Without Changing the Name or Mortgage
This is the riskiest option and should be a last resort.
- Risk: If the registered borrower (ex-spouse) defaults, the property may be foreclosed upon, leaving the staying spouse unprotected.
- Recommendation: A notarized agreement documenting repayment obligations, prohibition on eviction, and compensatory payment terms is essential.
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Assets Formed After Separation
In practice, the cutoff for assets accumulated during marriage is the date of separation, not the formal divorce date.
- Assets and savings earned by one spouse after separation are generally excluded from property division.
- It is important to document the separation date clearly and preserve bank statements and asset records as of that date.
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Dealing with Hidden Assets
If you suspect your spouse is concealing assets, the following legal tools are available:
Court-Ordered Investigation (Code of Civil Procedure, Article 186)
During divorce mediation or adjudication proceedings, the court can issue inquiries to financial institutions, securities firms, and the land registry on your behalf — without your spouse's knowledge.
Bar Association Inquiry (Attorneys Act, Article 23-2)
An attorney can request information from banks, government offices, and other organizations through the local bar association. This requires retaining an attorney.
Other methods:
- Search the land registry (available at Legal Affairs Bureaus) for undisclosed real estate
- Request disclosure of pay stubs and tax withholding certificates
- Use discovery orders during property division proceedings
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Procedure: Negotiation to Mediation to Adjudication
Property division can be requested simultaneously with divorce or as a separate claim after the divorce is finalized.
- Negotiation: The parties discuss and agree; the outcome is recorded in a divorce agreement (ideally notarized)
- Mediation: If no agreement is reached, either party may file for property division mediation at a family court
- Adjudication: If mediation fails, the family court issues a binding property division order
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Claim Deadline: 2-Year Absolute Limit
The right to claim property division expires 2 years after the divorce is finalized (Civil Code Article 768, Paragraph 2, proviso).
This is an absolute deadline (period of exclusion), not a statute of limitations. Unlike limitations periods, it cannot be interrupted or renewed. Missing the deadline by even one day permanently extinguishes the right to claim.
Warning: Even if negotiations are ongoing, the clock keeps running. If talks drag on beyond two years, the right is lost. Act promptly after divorce.
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Tax Considerations
Property received as part of a property division settlement is generally not subject to gift tax. However, the following tax issues apply:
Capital Gains Tax (on the spouse transferring assets)
The spouse who transfers property (real estate, stocks) in a property division may be subject to capital gains tax on any gain over the acquisition cost (Income Tax Act, Article 33). This can be a significant issue for real estate.
Real Estate Acquisition Tax (on the spouse receiving property)
The spouse who receives real estate through property division may be subject to real estate acquisition tax. However, if the transfer is recognized as a genuine liquidation of marital property, it is often tax-exempt.
Excessive Division May Trigger Gift Tax
If the amount of property divided significantly exceeds what is reasonable for marital asset liquidation, alimony, and support purposes, the excess portion may be subject to gift tax (National Tax Agency Notice, Article 9-8).