If you are a Korean American with property or family members in Korea, preparing your estate plan will require consideration of a number of issues that would not apply under different circumstances. To make sure your final wishes will be carried through, you need to thoughtfully and comprehensively address these issues with the right estate planning tools.
While you will need an estate plan in both Korea and the United States, it will most likely be inadvisable to use the same estate plan in both countries. The estate tax and intestacy laws in both countries are vastly different, and each country has different requirements regarding the enforceability of wills, trusts, and other estate planning documents. Whether your goal is to leave U.S.-based assets to loved ones in Korea, or to make sure that your Korean property gets distributed appropriately, it is essential that you choose the right tool (or tools) for the job.
Estate Planning for Assets Located in Korea
As a Korean American, when it comes to distributing your Korean assets, two of the most important factors involved in developing your estate plan will include:
- Making sure your estate plan will be legally enforceable in Korea, and
- Making sure that you appoint someone who can effectively administer your estate.
Without a legally enforceable estate plan, your assets will be subject to distribution according to Korea’s laws of intestate succession (the laws that govern distribution of property in the absence of an estate plan); and, without a knowledgeable administrator, even if you have an enforceable estate plan, it may never actually get enforced. While these two issues apply to everyone, they take on heightened importance when planning for the distribution of assets located overseas.
Estate Planning Tools in Korea
The following is an overview of the primary estate planning tools that are available in Korea:
While the enforceability of wills in the United States is a matter of state law, in Korea, wills are governed by the Civil Act of Korea (the “Civil Act”). Korea’s Civil Act recognizes five distinct types of wills:
- Holographic will – A will that is hand-written by the testator (the person creating the will), signed by the testator, and sealed.
- Recorded will – A voice-recorded will that includes the testator’s statement of his or her own name, the date, and the purpose of the will. The recording must also include a verification of accuracy by at least one witness.
- Notarized will – In order to create a valid notarized will in Korea, the testator must announce the contents of his or her will before two witnesses and a notary. The notary must record the announcement and read it aloud to verify its accuracy, and then the testator and the witnesses must all sign the will before a notary.
- Secret will – A secret will is a written will that is placed into a sealed envelope and delivered to a witness to be opened following the testator’s death. A secret will may be prepared by someone other than the testator, and either the testator, the creator, or both must write their name on the outside of the envelope. Upon delivery of the will to the witness, both the testator and the witness should sign and date the envelope, and then the will should be submitted to a notary or court clerk within five days in order to obtain a “fixed-date stamp” on the envelope.
- Will by dictation – A will by dictation may be created in Korea only in the event of a serious illness or other emergency that prevents the testator from creating a holographic, recorded, notarized, or secret will. In order to create a valid will by dictation, the testator must state his or her final wishes in front of two witnesses, one of whom must record the testator’s statements and then read them back to the testator and the other witness to verify the record’s accuracy. The testator and witness must then sign and seal the record to confirm their verification, and then the record must be delivered to the appropriate court within seven days of the illness or other emergency in order to obtain a certification seal.
In Korea, all wills are subject to probate, similar to the United States. In your will, you should appoint an administrator (called an “executor” in Korea) who will be capable of ensuring that your will is probated appropriately.
As recently as 2012, Korea did not recognize the use of trusts for estate planning. However, a recent law change approved the use of trusts similar to the U.S. revocable living trust. Revocable living trusts offer numerous benefits as compared to traditional wills; and, as a result, using a Korean trust warrants significant consideration during the estate planning process. However, due to the novelty of Korea’s trust law, Korean Americans seeking to establish revocable living trusts in Korea will need to be cautious to ensure that their trusts can withstand legal scrutiny.
Both domestic trusts and foreign trusts are subject to unique taxation requirements in Korea as well – adding an additional layer of complexity to the cross-border estate planning process.
3. Other Will Substitutes
In addition to trusts, other types of will substitutes that are available in Korea include:
- Life insurance and other insurance policies – Assets derived from life insurance and other insurance policies held in Korea can transfer outside of probate. These assets will transfer to the named beneficiary (or beneficiaries), similar to the United States.
- Employee benefits – If you worked in Korea before moving to the United States, you may have established a death retirement fund that entitles your named beneficiaries to a lump sum payment from your employer at the time of your death.
Importantly, insurance proceeds and death retirement benefits are subject to inheritance and gift taxes in Korea. As a result, you will need to consider the tax consequences of these assets when formulating the other components of your Korean estate plan.
Planning for Family Members in Korea to Inherit U.S.-Based Assets
What if you have assets located in the United States that you want to leave to family members who live in Korea?
Planning for distribution of U.S.-based assets to non-U.S. residents requires use of estate planning tools recognized under U.S. law. If you sign wills in both Korea and the United States (as will most likely be the case), you will need to make sure that your U.S. estate plan effectively covers your U.S. assets without disturbing the plans you put in place under Korean law. With cross-border estate planning, there can be a number of complicated tax and administration-related issues as well, so it will be critical for you to work with an experienced international estate planning attorney who can help you put together a sound plan that protects your assets while minimizing the burdens on your loved ones after your death.
Get International Estate Planning Help from Jiah Kim & Associates
Attorney Jiah Kim provides experienced legal representation for foreign nationals seeking to protect their assets in the United States and abroad. If you would like more information about preparing a cross-border estate plan that covers property or family members in Korea, contact Jiah Kim & Associates today. To arrange an initial consultation, you can call (646) 389-5065, or simply schedule a time that works for you.
This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.