Wills, contribution records, taxes: Why inheritance planning starts before death

"Inheritance disputes ultimately begin with disagreement — and the primary responsibility lies with the parents."

Jo Jae-young, vice president of Wealth Edu, appeared on the Herald Business investment YouTube channel "Investment 360" to discuss inheritance strategy, saying that conflicts over estates often grow because the deceased failed to clearly communicate their wishes while alive.

In practice, inheritance involves far more than simply deciding who gets how much. Questions arise over who provided more care for aging parents, whether any assets were transferred before death, and how to value real estate. "Most heirs are less driven by wanting more than by not wanting to feel shortchanged," Jo said. "Real estate in particular tends to spark conflict because each party assigns it a different value."

Jo identified writing a will as the most practical way to reduce inheritance disputes. "Why would you let assets you worked so hard to build be divided up by law?" he said. "If you have wishes of your own, you need to prepare to carry them out yourself."

The two main forms of will in Korea are the holographic will and the notarial will. A holographic will must be written entirely by hand and include the date, address, full name and seal. A notarial will is drafted and kept by a legal professional such as a lawyer, reducing the risk of forgery or alteration.

However, Jo noted that even a valid will does not eliminate all disputes. Spouses and lineal descendants can still claim a forced share of up to half their statutory inheritance entitlement.

By contrast, the forced-share right for siblings has been abolished following a Constitutional Court ruling that it was unconstitutional. As a result, if an unmarried person with no parents or children dies and leaves their entire estate to a partner, a school or another third party, siblings can no longer reclaim a portion through a forced-share claim.

Jo identified contribution — the legal recognition of an heir's special efforts on behalf of the deceased — as another critical variable in inheritance. Such recognition is more likely when an heir can demonstrate concrete acts such as nursing a parent through illness or repaying the parent's debts. "It is important to keep objective records, such as caregiving logs and money transfer histories," Jo advised.

Inheritance is also inseparable from tax. Because heirs bear joint liability for inheritance tax, one heir's inability to pay can shift the burden to the others. That makes it essential to factor in taxes from the moment assets are being divided. One possible strategy is to structure the inheritance so that the spouse receives liquid assets while children receive real estate, with the spouse then covering the inheritance tax bill.

The financial asset inheritance deduction is another tool worth using. Deposits, shares and funds are eligible for a separate deduction up to a certain ceiling. Net financial assets between 100 million won and 1 billion won (roughly $72,500 to $725,000) qualify for a 20 percent deduction.

"Inheritance is not simply a procedure for dividing up assets — it is a process of sorting out relationships and intentions within a family," Jo said. "Preparing a will, keeping records and planning for taxes in advance is the only way to reduce conflict and truly protect what you have built."

Jo's full remarks are available on the Herald Business "Investment 360" YouTube channel.