[Korean Law Insights] Useful Information About Korean Inheritance (2)

[Published on December 18, 2024 edition of the "Korean Law Insights" column in the Korea Daily’s Economic Expert Section]

• U.S. Citizenship Also Recognized Upon Proof

• Inheritance Tax Must Be Filed and Paid on Time

Continuing from the previous column on spouses, this time, I will discuss the relationships of children, siblings, and other family members. There is a common misconception that one must be registered in Korea’s Family Relationship Register or Hojeok to qualify as a legal heir under Korean law. However, this is not true. Even if a parent-child relationship is recorded only in the U.S. through a birth certificate and not registered in Korea, the relationship can still be proven using documents such as a U.S. birth certificate. In such cases, the individual can be recognized as an heir to inherit Korean assets.

In Korea, government-issued documents such as a Family Relationship Certificate officially verify relationships between spouses, children, and siblings, granting them a certain level of public credibility. However, in the U.S., such documents do not exist, and the government does not strictly manage individuals’ family relationships. Due to this, in inheritance cases involving U.S. citizens, Korean institutions such as banks, insurance companies, courts, and registry offices may require a sworn statement confirming that there are no additional heirs beyond those already identified.

One of the factors that can complicate an inheritance case is the occurrence of substitute inheritance (대습상속). Substitute inheritance applies when an individual who would have been an heir—such as a direct descendant (children, grandchildren, etc.) or a sibling—passes away before the deceased (the decedent) or becomes disqualified from inheritance. In such cases, the direct descendants or spouse of the predeceased heir (substituted heir) step in to inherit in their place.

For example, suppose a family consists of a grandfather, grandmother, father, mother, the individual (self), and an aunt. If the father passes away first and then the grandfather later passes away, the father, although he predeceased the grandfather and was not alive at the time of inheritance, is replaced by his spouse (the mother) and his direct descendant (the individual). Thus, they become the grandfather’s heirs through substitute inheritance. Typically, inheritance—except for the spouse—follows a bloodline principle, but substitute inheritance allows non-blood relatives such as daughters-in-law and sons-in-law to become heirs in certain cases.

When it comes to inheritance, taxes cannot be overlooked. A common practical issue with inheritance tax arises when the deadline for filing and paying the tax arrives before the inheritance distribution agreement is finalized. Calculating, filing, and paying inheritance tax on the entire estate while the division of assets among heirs is still undecided can be a challenging task.

In particular, the tax authorities do not issue an inheritance tax notice in advance. Instead, heirs must proactively identify the inherited assets, calculate the tax amount, file a tax return, and make the payment themselves. If the co-heirs fail to cooperate in this process and simply wait for a tax notice, they may face serious consequences.

Meanwhile, inheritance tax must be paid jointly by all co-heirs, up to the value of the inherited or inheritable assets. Due to this joint liability, if the inheritance tax is not fully paid on time, all co-heirs may become debtors for the unpaid tax, leading to difficult situations. If the inheritance tax remains unpaid due to disputes over the division of inherited assets, the tax authorities may impose collection measures such as seizures or liens on the co-heirs' personal assets.

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Jin Hee Lee/K-Law Consulting Korean Attorney

[Reference link in original Korean] 

https://news.koreadaily.com/2024/12/17/economy/economygeneral/20241217220233501.html