SOUTH KOREA Trends and Developments Contributed by: Woong-kyu Cho, Barun Law LLC
is argued that will-substitute trusts or life insurance may not be subject to statutory reserved portion return on the grounds that they are not included in the estate or lifetime gifts that form the basis for cal - culating the statutory reserved portion. However, an increasing number of lower court decisions have rec - ognised that will-substitute trusts may also be subject to statutory reserved portion return, and the Supreme Court has made clear that life insurance may be sub - ject to such claims where, in substance, it is similar to a gift. Considering these developments, courts are likely to continue determining whether a transfer is subject to statutory reserved portion return based on substance rather than form. Accordingly, both meth - ods are expected to be subject to statutory reserved portion return. However, the adoption of a statutory reserved por - tion system differs from country to country, and, even among countries that have adopted such a system, the specific details differ. Accordingly, where an indi - vidual acquires the citizenship of a country that does not have a statutory reserved portion system, or des - ignates the law of such country as the governing law, Korea’s statutory reserved portion system may not apply. As a result, cross-border estate planning has become increasingly important for families with inter - national elements. Looking ahead Korean succession law has undergone rapid devel - opment in recent years as inheritance disputes have increased in both number and complexity. A grow - ing body of Supreme Court decisions and legislative reforms has gradually established a more systematic and predictable legal framework governing succes - sion disputes. In particular, on 25 April 2024, the Constitutional Court of Korea rendered a decision of unconstitutionality or constitutional non-conformity regarding the provisions recognising siblings as persons entitled to a statutory reserved share, the provisions that did not separately prescribe grounds for the loss of the right to a statuto - ry reserved share, and the provisions that included, in the base estate for calculating the statutory reserved share, even property gifted by the deceased in return for active support of the deceased or contribution
to the formation of the inherited property. The Court requested improvement legislation, and recently, on 17 March 2026, improvement legislation reflecting this was enacted. Accordingly, significant changes are expected in the inheritance system, particularly the statutory reserved share system. First, the deceased’s siblings became unable to claim the return of the statutory reserved share as a result of the above decision. Second, it became possible to declare the loss of inheritance rights against heirs who have commit - ted immoral acts, such as abandoning the deceased for a prolonged period or subjecting the deceased to physical or mental abuse. If inheritance rights are lost, this has the effect of depriving the heir of inheritance rights themselves, including the right to a statutory reserved share. Therefore, such heir can no longer exercise any rights as an heir, let alone the right to a statutory reserved share. Third, where a gift or testamentary gift was made as compensation for specially supporting the deceased through long-term cohabitation, nursing care, or other means, or for specially contributing to the mainte - nance or increase of the deceased’s property, such gift or testamentary gift is excluded from the base property for calculating the statutory reserved share to the extent corresponding to the contribution. There - fore, an heir who contributed to the deceased may be relieved, in part, from liability for returning the statu - tory reserved share, even if the gift or testamentary gift infringed another heir’s statutory reserved share. Fourth, under the previous regime, unless otherwise agreed, the return of the statutory reserved share was in principle made by returning the gifted or testamen - tary property itself in kind. However, in the course of the above legislative improvements, this principle of return in kind was changed to the return of the value of the property and interest thereon. Accordingly, an heir who bears liability for returning the statutory reserved share must prepare cash in anticipation of such return. The large-scale transfer of wealth is not only leading to an increase in inheritance disputes in Korea, but also accelerating the development of Korean succession
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