Cover Story: Expats Beware: Complication of Inheritance Matter in Korea

cover story

Expats Beware:

Complication of Inheritance Matter in Korea

Article contributed by Mr. Sung Woo Kim, Partner at Yulchon LLC

Imagine the following situation, which is loosely based on true events. A “Mr. Schmidt,” a German citizen married a Korean citizen “Ms. Kim” (who became Mrs. Schmidt), and the couple, while moving back and forth between Korea and Germany, had two children: “Cherry”, a Korean citizen daughter, and “Durian”, a German citizen son. Then in 2020, Mr. Schmidt died in Germany without leaving a valid will. At the time of his death, his estate consisted of: (i) real property in Munich worth approximately 1.5 million Euros that he jointly owned with Mrs. Schmidt, (ii) an apartment in Seongnam-si, Gyeonggi-province, Korea, worth approximately 1 billion Korean Won, and (iii) a savings account and an insurance plan in his name with Korean financial institutions amounting to a total sum of 200 million Korean Won.

Mr. and Mrs. Schmidt’ marriage life was not always peaceful. For that reason, when Mr. Schmidt, who had worked as a university professor in Korea before retiring in 2005, permanently moved back to Germany along with Cherry. Mrs. Schmidt and Durian did not follow them, opting to stay behind in Seongnam-si instead. The physical separation drove an emotional wedge between the surviving family members as upon Mr. Schmidt’s death, Mrs. Schmidt and Cherry became embroiled in a bitter dispute pertaining to Mr. Schmidt’s estate. Eventually, having failed to reach an agreement, Mrs. Schmidt and Durian filed a lawsuit with a family court in Korea against Cherry to request partition of Mr. Schmidt’s estate.

To recap the key facts, Mr. Schmidtdied “intestate” (i.e., without a will) in Germany as a German citizen, Mrs. Schmidt and Cherry are Korean citizens, where as Durian is a German citizen. At the time of Mr. Schmidt’s death, Cherry was residing in Germany while Mrs. Schmidt and Durian were residing together in Korea. Likewise, Mr. Schmidt’s estate was both in Korea and Germany as well. These facts show that this case cannot be resolved strictly within the borders of Korea or Germany alone. Indeed, cross-border estates like our scenario here trigger a number of complex inheritance law-related questions. Most notably, can a Korean court exercise jurisdiction over a German citizen’s estate, especially when some of the assets are located in Germany? If so, should the court apply Korean law or German law to the merits of the case?

The above may sound like the plot of a courtroom movie. But given the sharp rise in marriages between Korean nationals and those from other regions including European countries, fact patterns similar to this one are becoming increasingly common. In other words, cross-border inheritance disputes have correspondingly increased in response to the rise in the number of international marriages. Needless to say, each country has its own unique set of laws. That is especially the case for laws governing family and estate matters since they closely incorporate and reflect each country’s traditions, customs, sociopolitical values, and general way of life. This is where rules on “conflict of laws” come into play. If legal relationships between individuals involve two or more countries, questions such as which country’s court has jurisdiction and which country’s law should apply to the merits of the case become key issues that must be resolved before a dispute can be resolved.

Returning to our scenario, would a Korean court have jurisdiction (“international jurisdiction”) over the matter? In other words, is the venue where the parties initiated the lawsuit a proper venue that can deal with and render a decision on the issues raised? On this point, Korean courts have held that international jurisdiction over a private dispute with international elements exists where there is a significant link between the dispute and Korea. That is, Korea must have a significant interest in the outcome of the dispute. In this case, since (i) both Mrs. Schmidt and Cherry are Korean citizens, (ii) part of Mr. Schmidt’s estate—including real property—is located in Korea, and (iii) the evidence to be submitted during the trial is presumably in Korea, it is highly likely that a Korean court would accept jurisdiction.

But the conclusion that a Korean court can validly exercise international jurisdiction does not necessarily mean Korean law applies to the substance of the inheritance law questions surrounding Mr. Schmidt’s estate. Ascertaining the “governing law” is a wholly different question from the question of which country’s courts have jurisdiction. Per Korea’s conflict of laws rules, inheritance matters are governed by the laws of the state in which the decedent (the deceased who left behind the inherited property) held citizenship at the time of his/her death. Here, since Mr. Schmidt died as a German citizen, the general rule indicates that German law shall apply to the merits of the case. But since Germany is a member of the EU, we must turn to the pertinent EU Regulation on succession and inheritance (“EU Regulationon Inheritance)¹, which is incorporated into German law. For our objective, the EU Regulation on Inheritance states that unless special circumstances exist, the laws of the place where the decedent was permanently residing at the time of his/her death apply to the whole estate subject to inheritance. Thus, German law is the governing law according to the EU Regulationon Inheritance as well. On the contrary, had Mr. Schmidt been a British citizen to whom the EU Regulation on Inheritance does not apply (the EU Regulation on Inheritance does not apply to certain European countries like the UK, Ireland, and Denmark), then there is a possibility Korean civil law might have separately governed inheritance matters with respect to Mr. Schmidt’s real property in Korea, pursuant to UK’s conflict of law rules.

The issue of which country’s laws govern inheritance matters pertaining to a cross-border estate can make a critical difference in terms of the outcome. After all, each country has different laws on the scope of recognized heirs, each heir’s share, and the process or means for partitioning inherited properties. Moreover, they may also differ on ancillary matters such as (i) the form required for a will to be legally binding, (ii) thelegal effect or executionof a will, (iii) and/oran heir’s right to seek “legitime”(i.e., legal right share) as well as that person’s specific share.

In this manner, cross-border estates are accompanied by a number of unexpected and surprisingly complicated legal issues. And these legal issues extend beyond court rooms. For example, one might expect that at least withdrawing funds from a non-Korean decedent’s bank account with a Korean financial institution would be relatively painless. Even that presumably simple process, however, can end up being quite complicated in practice. Inheritance matters are complicated enough on their own. When bank deposits involving non-Korean citizens are added to the equation, that triggers additional legal uncertainties: Consideration includes having to ascertain the law applicable to the bank deposits, the identity of the lawful heir(s), whether a valid will exists, and the share each heir is entitled to. Financial institutions tread especially carefully because if they carelessly pay out the deposit to an individual who claims to be a rightful heir, they might potentially expose themselves to legal liability if another heir later contests the first heir’s inheritance rights or share.

Typically, financial institutions require heirs or the executor of a will (custodian of an estate) requesting payment of deposits to submit proof of the decedent’s death and public documents which prove the identity of the rightful heirs, along with documentary evidence indicating anagreement on partitioning the inherited property, the decedent’s will, if applicable, and disqualification or renunciation of a heir’s right to inheritance. However, since financial institutions set their own requirements for such documents and evidence, we advise potential heirs to identify and accommodate for each institution’s specific requirements for withdrawing deposits they are entitled to in advance to avoid delays or any hindrances.

In real life, things can and sometimes do get even more complicated. Take, for instance, the possibility of the decedent being a dual citizen. That would add an extra wrinkle to the conundrum and further frustrate not only the parties but their lawyers as well. Fortunately for us, that is a question best left for another column.

SOURCES

¹
“Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession andon the creation of a European Certificate of Succession.

author's bio

Sung Woo Kim, Esq.,is one of the most reputable specialistsin areas of domestic relations, inheritance, family litigation, juvenile offense. As a former judge at the Seoul Family Court, including the presiding judge at the appeals court handling variouslitigations involving propertyownership, divorce, or inheritance among family members. Sung Woo is also the author of numerous publications and articles in areas of domestic relation and guardianship, and inheritance.

https://www.yulchon.com/en/professionals/professionals-view/swkim19037/kim-sungwoo.do

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