3.8 Trillion Won in Grandparent-to-Grandchild Gifts Over 5 Years... "Two-Thirds Given Before Elementary Graduation"

Surcharge on Wealth Transfer Proves Ineffective
Choi Kisang: "System Needs Improvement"

It has been revealed that over the past five years, the amount of assets passed from grandparents directly to grandchildren, bypassing their own children, has reached 3.83 trillion won. Approximately two-thirds of these generation-skipping gifts were made before the grandchildren turned 12, that is, before graduating from elementary school.

According to data submitted by Assemblyman Choi Kisang of the Democratic Party of Korea from the National Tax Service on October 4, there were a total of 78,813 cases of gifts made to minors from 2020 to 2024, with a total value of 8.2775 trillion won. Of these, generation-skipping gifts-where grandparents directly give assets to their grandchildren, bypassing their children-accounted for 28,084 cases, totaling 3.83 trillion won.

The average amount per generation-skipping gift was 140 million won, which is higher than the average of 90 million won per general gift to minors. Assemblyman Choi’s office explained, “This shows that generation-skipping gifts are increasingly being used as a means of wealth transfer across generations.”

Notably, 66% of generation-skipping gifts to minors were made before the recipients turned 12. The amount given to children under the age of six, before entering school, was 1.2225 trillion won, accounting for 31.9% of the total. For those aged 7 to 12, the typical elementary school age group, generation-skipping gifts amounted to 1.3049 trillion won, or 34.1%.

The main reason for the prevalence of generation-skipping gifts is that by bypassing their own children, grandparents can help their grandchildren avoid the gift tax that would otherwise be incurred when assets are first given to the children and then passed on to the grandchildren. To prevent this, the government and the National Assembly have amended the Inheritance and Gift Tax Act to impose a 30% additional tax on generation-skipping gifts, and a 40% surcharge if a minor receives gifts exceeding 2 billion won.

Despite these surcharges, the effective tax rate for generation-skipping gifts to minors has averaged 18.6% over the past five years, which is not significantly different from the 15.2% effective tax rate for general gifts to minors. This is because if assets are distributed among multiple children and grandchildren, the number of recipients eligible for the basic exemption increases, and if the recipient is a minor and the amount is below 2 billion won, the additional surcharge can be avoided.

Assemblyman Choi emphasized, “Although surcharges are imposed on generation-skipping gifts to minors to mitigate the intergenerational transfer and concentration of wealth, they are not fulfilling their intended role. To address the serious issues of polarization and inequality in our society, the system of surcharges on generation-skipping gifts needs to be improved.”