[PB Notebook] Financial Products That Help Before Wealth Transfer

Wealth Transfer Methods and Tax Strategies
How to Safely Pass on Assets and Reduce Inheritance Tax

Gifts are transferred during one's lifetime, while inheritance is the transfer of assets without compensation after death. In South Korea, taxes are imposed on the gratuitous transfer of wealth through the Inheritance and Gift Tax Act. The 2025 tax law amendment included expanding the personal deduction limit and lowering tax rates for inheritance tax calculation, but it was rejected during the National Assembly approval process. Although the government’s proposal indicates changes to deductions, it also awaits approval by the National Assembly. As a result, wealthy individuals who expected inheritance tax reductions through the tax law amendment are facing increased concerns.

The transfer of wealth is not simply about passing assets across generations. It can be seen as a parent's wish to pass on a system that grows the assets created by their generation to their children’s generation, hoping that the total amount of wealth increases over generations. However, since current tax laws may vary depending on the timing and type of assets transferred, consulting with an expert is essential for wealth transfer.

Jeong Nam-hoon, Kyobo Life Well Manager

Typical concerns regarding wealth transfer include whether assets can be transferred safely, whether the assets can be managed after transfer, and whether taxes on the transferred assets can be reduced.

There are various methods of asset transfer, but the most representative is a trust. A trust is a financial contract that specifies the assets to be transferred, timing, and methods according to a pre-written agreement. Once a trust is executed, anyone other than the settlor cannot change or express opinions about the executed trust contract, making it the safest method of asset transfer. Among trust companies, choosing an insurance company that handles long-term products can be a wise option.

Even if the tax law is amended, inheritance tax will be reduced but not exempted. Wealthy individuals above a certain level must pay inheritance tax. In this case, whole life insurance is a useful alternative to reduce inheritance tax. The death benefit of whole life insurance may or may not be included in the inherited assets depending on the designation of the insurance parties. If the premium payer and the beneficiary of the insurance are the same, the death benefit arising from that insurance contract is not included in the inherited or gifted assets.

Trusts and insurance products can be structured to meet customer needs. By considering liquidity, safety, and growth according to customer requirements, plans can be executed and wealth transfer completed.

Namhoon Jeong, Kyobo Life Wealth Manager