[2023 Gold Age Forum]③“If You Have a Large Inherited Estate, Distribute Gifts in 10-Year Intervals”

Park Jung-guk, Head of Inheritance and Gift Center at Hana Bank WM Headquarters
High-net-worth individuals can save taxes through gifting... Also consider tax savings for taxable pensions

Park Jung-guk, Head of the Inheritance and Gift Center at Hana Bank WM Headquarters, is giving a lecture on "Happy Tax-saving Strategies for Retirement" at the "2023 Asia Economy Gold Age Forum" held at the Bankers' Hall in Jung-gu, Seoul on the 19th. Photo by Hyunmin Kim kimhyun81@

Park Jung-guk, Head of the Inheritance and Gift Center at Hana Bank WM Headquarters, stated, "The basic strategy for inheritance and gifts is to pay what would later be taxed at a 50% rate now at a 10-30% rate and finish the process."

On the 19th, Park gave a lecture titled "Happy Tax-saving Strategies for Retirement" at the '2023 Asia Economy Gold Age Forum' hosted by Asia Economy at the Bankers Hall in Myeongdong, Seoul.

He advised, "The tax rates for inheritance and gift taxes are the same, ranging from 10% to 50%. Although the rates and calculation structures are identical, the taxation methods differ, so gifting can be advantageous in some cases."

Park explained that inheritance tax is levied based on the total assets passed on to the spouse and children, whereas gift tax is imposed on each recipient individually. He added, "By distributing gifts to sons, daughters-in-law, grandchildren, and others, taxes can be reduced. When there is a large amount of assets to inherit, it is beneficial to spread out the gifting over 10-year intervals if only considering taxes."

Park also mentioned, "Even for real estate within the exemption range, it can be advantageous to file an inheritance report." He advised, "For single-family homes or commercial buildings valued under 500 million KRW, it is better to report using the higher value between the standard market price or the appraised price." He continued, "This is a tax-saving strategy considering capital gains tax when selling later. Although you do not pay tax during inheritance due to exemptions, capital gains tax arises when selling the inherited real estate." He emphasized, "To manage tax efficiently, it is unwise to skimp on tax accountant fees. Since there are many exceptions to the tax base, you need a tax accountant to devise strategies."

He also introduced ways to reduce taxes when receiving pensions. Park explained, "National Pension is taxed upon receipt. If you have other comprehensive income, you must file a comprehensive income tax return in May by combining it with other income." He added, "National Pension also affects health insurance premium calculations. If your comprehensive income exceeds 20 million KRW annually, you must pay health insurance premiums as a regional subscriber."

Since the National Pension receipt amount is included in the comprehensive income amount, it affects health insurance premiums. However, when calculating health insurance premiums, only about 50% of the National Pension receipt amount is reflected, and the rate is applied accordingly. He said, "Many want to reduce health insurance premiums, but this requires no other income and often advising to sell the house and move to the countryside, which is not an easy solution." He continued, "Realistically, it is difficult to save on health insurance premiums. It is better to prepare well for retirement so that income continues to be generated after retirement. Even after paying taxes and health insurance premiums, more than half of the income comes to you."

Private pensions such as pension savings, Individual Retirement Pension accounts (IRP), and retirement pensions do not affect health insurance premium calculations. He advised, "If private pension payments from pension accounts are under 12 million KRW annually, taxpayers can choose not to include pension income in the comprehensive income tax base and instead apply separate taxation."