Proposed inheritance law would help spousesThe government is taking steps to introduce a law that would enable a surviving spouse to inherit more assets from a departed spouse and pay less inheritance tax.
Under the current inheritance law, if a husband dies without a will, his estate is divided between his wife and children in shares, with the wife receiving a 50 percent larger share than each individual child.
For example, if a man with a wife and three children left 450 million won ($424,000) in assets, then his wife would receive 150 million won and each child would receive 100 million won. The more children he had, the less his wife would inherit.
However, the new system would leave 50 percent of his assets to his wife first, regardless of the number of children, and his children would split the other 50 percent equally, according to the Ministry of Justice, which is preparing to propose the bill.
The revision is designed to protect surviving spouses from financial hardship, especially as Korean society rapidly ages.
However, this revised system would mean a family could be subject to even more inheritance tax than it already faces, warns Samsung Securities.
Under the Korean inheritance law, a surviving spouse must pay inheritance taxes, so when children inherit money from their longer-living parent, that money has been double-taxed.
If the surviving spouse gets a larger share of the deceased member’s estate, that means a larger amount is subject to that double-tax.
The Samsung Securities analysis said the difference would be minimal for households with less than 3 billion won in assets.
However, for a family with 10 billion won, the new system would result in a 28.5 percent rise in tax burden, to 3.96 billion won from 3.08 billion won.
“The revision of the inheritance law was never intended to increase tax revenues,” said Kim Sang-yong, a law professor at Chung-Ang University who is temporarily in charge of the revisions for the Justice Ministry. “It is only aimed at stabilizing the life of surviving spouses.”
To make up for this increase, the government is also considering exempting spouses from the inheritance tax altogether.
“We are discussing expanding an exemption of the inheritance tax on the 50 percent of the assets given to a spouse,” a Justice Ministry official said.
The current law exempts inheritance taxes for spouses only up to 3 billion won. But the government is mulling over total exemption for a surviving spouse.
In that case, the total amount of the inheritance taxes that would be paid by a family with 10 billion won in assets would increase 8.8 percent.
“Considering the legal procedures needed to introduce the bill, we think the Justice Ministry could submit the bill to the Assembly in June,” said an official at the Ministry of Strategy and Finance.
“Ahead of the plenary session, a revised tax bill would be completed in August, and we expect the revision on the inheritance law to be reflected at that time.”
BY choi hyun-chul, KIM HEE-JIN [firstname.lastname@example.org]