[PB Notebook] Seniors Contemplating Inheritance... What Is the Final Choice?

Kim Won-jae Kyobo Life Wealth Expert

Kim Won-jae, Kyobo Life Wealth Expert. Photo by Kyobo Life

What do the two highly popular dramas 'Queen of Tears' and 'The Youngest Son of a Conglomerate Family', both surpassing 20% viewership ratings, have in common? The core element driving their stories is 'wealth.'

Korea has rapidly undergone a turbulent period of economic growth, intensifying wealth polarization. Until before the Asian financial crisis, there were quite a few cases of 'a dragon rising from a small stream' (self-made success stories), but recently, families with relatively ample economic power are more likely to have children who maintain that economic status. In other words, it is an era where the parents' economic power directly becomes the children's economic power.

However, parents also face many concerns. They wish for their children and grandchildren to prosper and pass on their wealth, but they cannot know how their descendants will actually use that wealth. In reality, there are frequent cases where the children and grandchildren misuse the inherited wealth, contrary to the parents' intentions.

With the anxiety that stories once heard only in the news could become 'my own story,' more people are recently turning to trusts as an alternative to safely transfer wealth. A trust literally means 'to entrust with confidence.' It is entrusting a reliable entity to manage, dispose of, operate, and distribute one's assets according to one's will and to carry out those instructions.

At this time, the settlor’s requirements include their family composition, usual intentions regarding asset distribution and utilization, and future goals, incorporating their values into the execution, while a financial company performs management and supervisory roles. In other words, the trust company acts as a 'butler' for the client’s assets.

For example, if the main content of the trust includes testamentary provisions, it becomes a 'will substitute trust.' It can preemptively resolve inheritance disputes after death through the trust contract, and if there is someone the settlor wishes to give more to, or if they want to distribute the assets steadily over a long period rather than in a lump sum, the trust can fulfill that role according to the contract terms.

Moreover, there are various types of trusts increasing day by day, such as 'gift trusts' that provide a safety mechanism called 'gift cancellation' by entrusting conditional gifts, 'guardianship trusts' that appoint guardians and entrust asset management in case of incapacity to express intentions, 'disability trusts' that designate disabled family members as trust beneficiaries and can utilize a tax exemption benefit on the gifted principal up to 500 million KRW, and 'insurance claim rights trusts' where life insurance policies secured by ordinary death are entrusted to a trust company, allowing the policyholder (settlor) to plan how to use the insurance proceeds.

Leaving wealth behind means not only financial gain but also passing on the life and values of the person who left it. If you want those lives and values to remain intact and for the beneficiaries to use the assets more abundantly and meaningfully, trusts can fulfill that wish. If you face asset management issues that are difficult to solve alone, it is recommended to consult with a trust expert before worrying to find a solution.